ITR Filing 2024: High Value Transactions That May Result in Notice from Income Tax Department
![ITR Filing 2024: High Value Transactions That May Result in Notice from Income Tax Department ITR Filing 2024: High Value Transactions That May Result in Notice from Income Tax Department](https://akm-img-a-in.tosshub.com/businesstoday/images/story/202407/668a08c6e46de-banks-or-cooperative-societies-are-mandated-to-report-transactions-where-cash-payments-are-made-for-071725355-16x9.jpg)
Taxpayers should note that high value cash transactions exceeding a certain amount are subject to monitoring by the Income Tax Department. Failure to declare such transactions in the Income Tax Return (ITR) may result in notice from the tax department.
Notable cash transactions like bank deposits, mutual fund investments, real estate deals and stock trading come under the purview of IT department monitoring. If these transactions exceed the set threshold, people are advised to inform IT department to avoid receiving notice.
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In addition, taxpayers often make mistakes when filing their income tax return, which can lead to the rejection of their income tax return or an income tax assessment.
To facilitate access to the records of important transactions of individuals, the Income Tax Department has entered into agreements with certain government agencies and financial institutions.
Bank account transactions
Any transaction exceeding Rs 10 lakh in a savings account or Rs 50 lakh in a current account in a financial year will have to be reported to the Income Tax Department. Deposits exceeding Rs 2 lakh in a single transaction will also be subject to scrutiny.
Fixed deposit
With the recent hike in interest rates on fixed deposits, these have become more attractive options for investors looking for a stable and predictable source of income. The current threshold for reporting cash deposits to the Income Tax Department (ITD) is Rs 10 lakh during a single financial year (from April 1 to March 31), regardless of the intended use, including funds invested in fixed deposits. It is important to monitor multiple deposits in different bank accounts. Even if you split a cash deposit into smaller amounts in different accounts, any total above Rs 10 lakh will raise eyebrows with the authorities.
Exceeding this limit is not necessarily an indication of tax evasion but will be checked by the ITD, which will require a clear explanation of the source of funds. This check is relevant for all fixed deposits above Rs 10 lakh. The Rs 10 lakh limit refers to the total value of your fixed deposits across all accounts and financial institutions and not just the amount of each individual deposit.
By filing Form 61A, a statement of financial transactions, banks are required to disclose transactions when the total amount of one or more fixed deposits exceeds the specified limits.
Cash payments
Banks or cooperatives are required to report transactions involving cash payments for the purchase of bank drafts, money orders or bank checks.
Credit card payments
Cash payments for credit card bills exceeding Rs 100,000 per year and cashless payments exceeding Rs 1 million using all credit cards are subject to monitoring.
The Income Tax Department is empowered to issue notices for significant transactions such as domestic business class flights, payment of tuition fees or donations, purchase of jewellery, household appliances, paintings, marble and electricity expenses exceeding Rs 100,000 within a financial year.
Buying and selling real estate
In India, the Income Tax Department (ITD) requires buyers purchasing properties valued above Rs 30 lakhs to declare the source of funds used for the purchase. This rule is designed to combat tax evasion and prevent money laundering activities.
The current thresholds for disclosing the source of funds are Rs 50 lakhs for property transactions in urban areas and Rs 20 lakhs for rural areas. However, individual states may have stricter thresholds, so it is recommended to check the specific regulations of the region where the property is being purchased.
The declaration of the source of funds can be made in the registration documents or by submitting Form 26QB to the ITD. Even if the value of the property is below the prescribed threshold, the ITD reserves the right to request information on the source of funds if it suspects discrepancies in your income or financial activities. Failure to declare the source of funds can result in penalties, tax assessments and possibly investigations.
To process an ITD notice regarding high-value cash transactions, it is imperative to collect sufficient documentation to support your explanation regarding the source of funds. This documentation should consist of bank statements, investment statements, or other legal documents related to inheritance.
If you are unsure or have concerns about disclosing the origin of funds, you should definitely contact an experienced tax advisor for individual advice. Transparency and compliance with tax laws are crucial for responsible financial planning and reducing the risk of legal problems.
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