Top 6 Transactions May Attract Income Tax Notice

The Following 6 Transactions May Lead To An Income Tax Notice

The income tax authority keeps an eye on high-value transactions, and these transactions may frequently exceed a specific level around Diwali or at other times as well. If you fail to declare these six transactions on your income tax return, you risk receiving a warning from the IRS (ITR)

Diwali is a significant holiday during which people give presents to friends, family, and coworkers. However, there are situations when the monetary value of these presents may exceed the barrier. It is certain to draw the attention of the tax authorities and invite an income tax notice if it is not declared in your income tax return or if you forget to quote your PAN where it is required by law.

The income tax agency must receive reports from all banks and financial institutions in India regarding a specific set of transactions that were carried out by people.

The income tax division has implemented the statement of financial transaction (SFT) provision to monitor high-value transactions carried out by individuals.

The department compares the SFT data with the information that taxpayers have provided in their ITRs, and if there is a discrepancy, it notifies the taxpayer and gives them the chance to explain it.

So, these are the situations that could result in a tax notification.

• Using A Credit Card For Major Purchases

If you choose to pay your credit card bill in cash (Rs 1 lakh or more) or through another method (Rs 10 lakh or more) in a given fiscal year, the card issuing bank is required to report the transaction to the income tax department.

If credit card charges “are disproportionate to the returning income,” the government often notifies taxpayers.

It can go on to clarify that occasionally a person may have a credit card for use at their place of employment or another business. Therefore, if business expenses exceed the allowed limitations, they may be reported to the income tax department. It can also take place when you lend a friend your credit card, and they later pay you back for the money they spent using it for their purchase.

• Cash Purchases of High-Value Goods and Services

The income tax division intends to prevent the creation and movement of black money through cash purchases of high-value goods and services.

Therefore, information about such transactions must be included in Form 61A if cash receipts for the sale of products or the performance of services to specific specified persons surpass a set threshold. A notification may be issued to you if your expenditures do not match your income after the information in Form 61A and your ITR have been compared.

Form 61A is a declaration that must be used by specific people to report certain financial activities. Online and offline retailers must report high-value purchases made by customers when the transaction amount exceeds certain thresholds (Form 61A).

• Bank Transactions

Every bank is required to disclose cash deposits and withdrawals that total at least Rs. 50 lakh for current accounts and Rs. 10 lakh for savings accounts within a fiscal year. According to Tanna, banks will also disclose term deposits worth Rs. 10 lakh or more in a fiscal year, unless they are the consequence of a previous deposit being renewed.

• Property Transactions

A buyer of an immovable property cannot legally become the owner of that property until the deed has been registered following the Indian Registration Act of 1908. The maximum amount for such a transaction is Rs 30 lakh, and if it exceeds that amount, the registrar will inform the income tax department of the buyer and seller’s information.

Therefore, when you submit your ITR, be sure to mention the specifics of such a transaction because the department will match and cross-verify these details.

• Shares/Mutual Funds Transaction

If a shareholder receives Rs. 10 lakh or more in a fiscal year for purchasing firm shares, the company is required to declare the shareholder’s information. The Rs. 10 lakh limit is also applicable to mutual funds, debentures, and bonds.

• Forex Transactions

The income tax department must be notified of any receipts for the sale of foreign currency or costs paid in that currency with the use of a bank card, a check, a traveler’s check, or any other financial instrument with a value of at least Rs. 10 lakh.

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