The Income Tax (IT) Department has intensified scrutiny of high-income individuals with disproportionately low bank withdrawals compared to their lavish lifestyles in a bid to curb tax evasion.
The tax authorities have issued notices to several high-net-worth individuals (HNIs), demanding comprehensive monthly expense reports covering spending on groceries, clothing, education, and other essentials. Additionally, they have sought detailed information about their family members to identify discrepancies in tax returns.
“We are targeting individuals who exhibit a stark mismatch between their reported income and their expenditure patterns. Many of them lead opulent lifestyles—flaunting luxury cars, shopping for designer wear, indulging in fine dining, and traveling internationally—while their bank accounts reflect minimal withdrawals and digital transactions. These cases are being flagged for suspected undeclared income or cash transactions to fund their expenses,” said a senior IT official, confirming that multiple notices have been sent to suspected tax evaders.
According to tax officials, the notices seek granular details of monthly expenses, including:
Groceries and household supplies
Clothing and personal care
Education and tuition fees
Entertainment and travel
Medical expenses
Utility bills and maintenance costs
The investigation particularly targets individuals maintaining a very high standard of living with minimal banking activity, yet spending lavishly on luxury goods, fine dining, and exotic vacations.
“These high rollers’ bank statements reveal negligible withdrawals and digital transactions. However, data analytics of their income tax returns (ITR) and social media accounts show a stark contrast between their declared income and actual spending, indicating unaccounted cash or undeclared income sustaining their lifestyles,” explained chartered accountant Deepak Shah, confirming that some business owners and traders have received IT notices this week.
To ensure compliance, the tax department is leveraging advanced data analytics and artificial intelligence (AI) to cross-verify taxpayers’ information with their social media posts, property records, and credit card transactions to detect inconsistencies.
However, some taxpayers have raised concerns about the intrusive nature of these inquiries.
“Asking for details of grocery bills and clothing expenses feels like an invasion of privacy,” said a Mumbai-based entrepreneur facing IT queries.
Meanwhile, tax experts defended the move, arguing that such measures are necessary to ensure fairness and compliance in the tax system.
“The government is simply trying to close loopholes that allow individuals to evade taxes. If you have nothing to hide, you have nothing to fear,” said tax consultant Ravinder Kumar.
The tax department plans to implement a broader strategy to curb black money and enhance tax compliance using data analytics, AI, and financial intelligence tools to identify discrepancies between reported income and actual spending habits.
