High-value transactions that may result in income tax notice

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Due to the tight guidelines issued by the central government, the information technology department is currently hyperactive. When it comes to fighting against tax evasion and discourage high volumes of cash transactions, the income tax department and several investment platforms like mutual fund houses, financial institutions, and dealers have tightened their public guidelines. That said, all the taxpayers must maintain all the necessary supporting documents to justify the transactions in case of any IT notice being served.

The following is a list of high-value transactions that can land you a tax notice if ignored:

-The Central Board of Direct Taxes (CBDT) has made it mandatory for banks and cooperative banks to report cash deposits totaling Rs 10 lakh or more in one or more accounts (other than current and time deposits) of a person within a financial year.

-Making cash deposits or withdrawals from a current account of the amount exceeding Rs 50,00,000 in a financial year.

-The rules are stringent when it comes to purchasing shares, mutual funds, debentures, and bonds. Companies or organisations issuing bonds or debentures would be required to report to the government any receipt from any person for the acquisition of bonds or debentures totaling Rs 10 lakh or more in a financial year. That said, a comparable cap is imposed on the reporting of stock and mutual fund purchases.

“If a person deposits more than Rs 10 lakhs in a financial year, banks ought to report this transaction to the income tax authorities. Buying shares, debentures, mutual funds cash component in the investment mentioned above avenues if exceeds Rs 10 lakhs then you are on high alert,” said Amit Gupta, MD, SAG Infotech.

– When it comes to the property transactions, the property registrar will be required to disclose to the tax authorities every person’s purchase or sale of immovable property worth Rs 30 lakh or more.

– Foreign exchange purchases of up to Rs 10 lakh are reported to the tax department. Foreign exchange purchases include travelers’ cheques, forex cards, debit, or credit cards.

-Payments made in cash for credit card dues of Rs 1 lakh or more will have to be declared, the CBDT warns. Additionally, if an individual pays Rs 10 lakh or more in a fiscal year to settle credit card debts (in any manner), these transactions will be reported to the tax authorities.

– Cash receipts received by a businessman or a professional which exceeds Rs 2,00,000 (per person or per transaction) for selling their goods or rendering their services of any nature.

– Electricity expenditure incurred of more than Rs 1 lakh.

To conclude, one should keep away from high-value cash transactions.