In the world of income tax, the belief that cashless transactions evade scrutiny has led to misconceptions. However, the Income Tax Department closely monitors various transactions, including cash deposits, card payments, and UPI transactions, using advanced data analytics tools. Here are five high-value cash transactions that might attract an Income Tax notice:
Large Cash Deposits:
Depositing over ₹10 lakh in cash across savings accounts in a single financial year triggers attention. While surpassing this limit doesn’t imply tax evasion, explanations about the source become necessary to avoid inquiries or penalties.
Fixed Deposits with Cash:
Exceeding ₹10 lakh in cumulative fixed deposits across accounts can prompt scrutiny. Source transparency is vital, aligning the deposit with declared income to prevent unwarranted attention.
Cash Investments in Securities:
Investing over ₹10 lakh in shares, mutual funds, or bonds with cash transactions may invite an income tax notice. Digital transactions offer a traceable trail, emphasising the need for transparency.
Credit Card Bill Payments in Cash:
While no specific rule mandates scrutiny for cash payments, settling credit card bills exceeding ₹1 lakh in cash prompts information requests. High-value transactions could trigger general scrutiny for potential inconsistencies.
Cash Payments for Properties:
Acquiring properties valued over ₹30 lakhs demands disclosure of the fund’s origin. Non-compliance may result in penalties and investigations. It’s crucial to understand specific thresholds and declare the source of funds promptly.
The Income Tax Department’s focus lies in identifying disparities between declared income and expenses. To address notices, maintaining comprehensive documentation substantiating the source of funds is vital. Seeking guidance from a tax advisor ensures adherence to regulations, promoting transparent financial management and mitigating legal complications.
