Have you ever wondered from where do the income tax department get all the information about taxpayers. How much do they earn, which bank accounts they have, how do the taxpayers spend, where do they spend etc. In fact, the Income Tax Department now works on the logic that a person can hide his earnings but cannot hide his expenses or investments. In the last few years, the Income Tax Department has made a mechanism, by which the expenses and investments are monitored.
The question is which of our transactions is monitored by the Income Tax Department. The answer is high-value transactions i.e. on big expenses and investments. The name of this system is Statement of Financial Transaction i.e. SFT. Under this, various types of limits have been fixed for transactions. In case of transactions exceeding this limit, the concerned unit informs the Income Tax Department about it.
Now, talking about when and to whom the Income Tax Department has to give information about financial transactions.
Bank accounts
1. The first transaction is related to the savings account. In the entire financial year, the bank informs the Income Tax Department about the deposit or withdrawal of Rs 10 lakh or more in the cash savings account on whether this transaction is from one account or more than that from the account. Apart from this, information is also given to make a demand draft (DD), pay order or banker’s check of Rs 10 lakh or more through cash.
2. Information is given to the Income Tax Department on depositing or withdrawing cash of Rs 50 lakh or more in the current account.
3. The information of FD of 10 lakh or more in a financial year is also given to the tax department. This is applicable in both cash and digital cases.
Credit cards
4. The fourth transaction is related to the credit card. If the credit card bill of one lakh or more is paid in cash or the bill of 10 lakh or above is paid in any other way, the information is given to the department.
Real estate
5. The fifth transaction is related to real estate. If you buy or sell a property worth Rs 30 lakh or more, then it is the job of the property registrar is to give information about it. On buying a property worth more than Rs 50 lakh, 1% TDS (deducted at source) is deducted by the buyer. Based on the TDS, the transaction information reaches the department.
Shares, mutual funds
6. If a person buys shares, debentures, bonds or mutual funds worth 10 lakh or more in a financial year, then it is the responsibility of that company or institution to inform the Income Tax Department.
7. The seventh transaction is related to the common man. Crores of people come under its ambit. In case of payment of more than Rs 2 lakh in cash for the purchase of any goods or services, the concerned seller should inform about this to the income tax department. For example, if you buy jewellery and pay more than 2 lakhs in cash, then it is the responsibility of the shopkeeper to inform it to the department. Also, for all transactions above Rs 2 lakh, you also have to provide PAN card.
Information about financial transactions also reaches the Income Tax Department through PAN, mobile number and Aadhaar as they are used in almost every major transaction. PAN is required for opening a bank account or demat account, applying for a credit card. If your bank deposit, insurance premium, mutual fund or bond purchase, restaurant, hotel or foreign trip bill is more than Rs 50,000, then too you have to give PAN. If rent received from property, is more than Rs 10,000, then PAN has to be given.
TDS is also a way to keep an eye on the income of the taxpayers. TDS is deducted on the amount deposited in the bank or post office on receiving interest of more than Rs 40,000 in a year. Similarly, TDS is deducted in other cases including buying property. This also lets the Income Tax Department know about your earnings.
Annual information statement
This means whether you want it or not, the income tax department is aware of your every big transaction. But there is no need to panic as long as you can justify your spending and investment with earnings. If there is a difference between your income and expenses, then notice can be given by the Income Tax Department. You will find the details of all the expenses and investments made in the financial year in your Annual Information Statement which can be downloaded from the website of the Income Tax Department. So you must check AIS before filing income tax return so that there is no difference between income and expenditure or investment.
