Transactions That Can Attract An Income Tax Notice

Here are the instances that could attract an income tax notice:

Using Credit Card For Big Purchases: Payment of credit card bill in cash (Rs 1 lakh or more) or through other mode, such as cheque, bank transfer (Rs 10 lakh or more) in a financial year, then the card issuing bank has to mandatory report the same to the income tax department.

Purchase Of Goods/Services In Cash: The income tax department wants to discourage the generation and flow of black money through cash payments for high-value goods and services. 

Hence, if cash receipts exceed a certain limit for the sale of goods or rendering of services for certain specified persons, then the details of such transactions will have to be mentioned in Form 61A. The data in Form 61A will then be matched with your ITR, and if your expenditure mismatches with your income, a notice may be served to you.

Bank Transactions: Every bank has to report cash deposits and cash withdrawal transactions of Rs 50 lakh or more in a financial year for current accounts, and Rs 10 lakh for savings accounts. Tanna says that banks will also report term deposits of Rs 10 lakh or more in a financial year, unless it is as a result of the renewal of another deposit made previously.

Property Transactions: Unless and until an immovable property’s deed is registered under the Indian Registration Act, 1908, no buyer of such property can legally become the owner of such property. The limit for such a transaction is Rs 30 lakh, and where it exceeds that limit, then the Registrar will report the details of the buyer and the seller of the property to the income tax department. 

So when you file your ITR, make sure to include the details of such a transaction, as these details will be matched and cross-verified by the department.

Shares/Mutual Funds Transaction: Every company will have to report details of their shareholders if they receive Rs 10 lakh or more in a financial year for acquiring their company’s share. For mutual funds, debentures, and bonds too, the limit of Rs 10 lakh is applicable.

Forex Transactions: Any receipt from a person for sale of foreign currency or expenses paid in any such foreign currency using banking cards, by draft, travelers’ cheque, or any other financial instrument with value Rs 10 lakh or more, will have to be reported to the income tax department.

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