Some mistakes made in haste to save income tax can cause big problems. Many times people make big transactions without knowledge, due to which the Income Tax Department catches the eye of them. If you also want to avoid these mistakes, then it is very important to understand certain transactions and follow their limits.
Income Tax Department keeps an eye on transactions
Institutions like banks, mutual funds, brokerage houses, and property registrars are mandated to report to the Income Tax Department on transactions exceeding the prescribed limits. In such a situation, the Income Tax Department investigates the source of the money and can also send a notice if necessary. Let us know about 6 such transactions which can become a cause of trouble.
1. Notice on FD of more than Rs 10 lakh
If you deposit more than Rs 10 lakh in a fixed deposit (FD) in a financial year, the Income Tax Department may question you about the source of the money.
- Cash or digital transaction: Whether the amount is in cash or digital, the department can ask for information about it.
- CBDT information: Banks have to report to CBDT if any amount of Rs 10 lakh or more is deposited in cash.
Caution
Use check or online mode to deposit large amount in FD and keep the source clear.
2. Cash deposit of more than Rs 10 lakh in bank account
Under CBDT rules, if more than Rs 10 lakh in cash is deposited in any bank or co-operative bank, then its information is given to the Income Tax Department.
- Not applicable to whom: This rule does not apply to current account and time deposits.
- source check: The department may raise questions about the source of cash deposits of large amounts.
Caution
Follow banking procedures and rules when depositing large amounts.
3. Property Transactions (Rs 30 lakh or more)
If you spend an amount of Rs 30 lakh or more in the purchase and sale of property, then the Registrar has to inform this to the Income Tax Department.
- High Value Transaction: The department may question you as to what is the source of this huge amount.
Caution
Keep all the documents correct and maintain transparency in property deals.
4. Purchase of shares, mutual funds, debentures, and bonds
If a person invests an amount of Rs 10 lakh or more in shares, mutual funds, debentures or bonds in a financial year, then the concerned institutions have to inform the department.
Caution
Always use banking channels when making large investments and mention these in your returns.
5. Cash payment of credit card bill
Paying a large portion of your credit card bill in cash can get you into trouble.
- more than Rs 1 lakh: If you pay a bill of more than Rs 1 lakh in cash, you may be questioned.
- Rs 10 lakh annual limit: The department can send a notice if cash payment of more than Rs 10 lakh is made in a financial year.
Caution
Make credit card payments digitally and ensure that your expenses are in line with your income.
Why are notices issued?
Information related to large cash transactions is sent to the department so that cases of tax evasion can be detected. If a large difference is found between your income and expenses, it may cause suspicion.
