• Notification Date: 15-04-2024
• Notification No: N/A

Real Estate Deals, Credit Card Transactions: One can Receive Income Tax Notice for 6 Times

The Income Tax Department carefully tracks all financial deposits and withdrawals made by individuals. The I-T Department uses data from different sources to verify tax compliance, with certain transactions triggering additional scrutiny. For example, the tax department keeps a close on eye on all high-value cash transactions. Like if someone with a savings account gets a deposit over Rs 10 lakh in cash during a fiscal year, this might call for a notice from the department asking for an explanation about the source of these funds. 

It is to be noted that the Central Board of Direct Taxes (CBDT) requires banks to mandatorily report any instances in which an individual deposits a total of Rs 10 lakh or more during a financial year, across one or more time deposit accounts, excluding deposits made through the renewal of another time deposit. 

CBDT requires all banks, including cooperative banks, to report cash deposits of Rs 10 lakh or more in a financial year across one or several accounts of an individual, excluding current accounts and time deposits. 

Financial institutions and firms issuing bonds or debentures have also been directed to report receiving Rs 10 lakh or more from any individual in a financial year to acquire such securities. This is because large cash movements can be a cause of worry or a sign of hidden income, tax evasion or black money. 

Here are 6 times when your credit card transactions can invite an I-T notice: 

1. Cash deposits exceeding Rs 10 lakh for savings accounts and Rs 50 lakh for current accounts, as well as large withdrawals, could prompt inquiries regarding the origin and intended use of the money, Ritika Nayyar, Partner, Singhania & Co told Business Standard.  

2. Real estate transactions over Rs 30 lakh can also draw tax department's scrutiny. The department might be keen to know deal specifics and involved parties. 

3. Investments exceeding Rs 10 lakh in stocks, mutual funds, or bonds may attract scrutiny if the origin of these funds is unclear and appears inconsistent with your reported income. 

4. The I-T department does not actively oversee individual credit card transactions. However, cash payments exceeding Rs 1 lakh towards credit cards or substantial debt settlements surpassing Rs 10 lakh made in cash may be subject to scrutiny and investigation. Ensuring the authenticity in significant transactions with transparent fund sources is crucial. Unaccounted cash inflows may lead to investigations. 

5. Mismatch of declared income with data from banks may trigger a notification. Keeping accurate records is crucial to avoid discrepancies. 

6. Purchase of foreign exchange, including travellers' cheque and forex cards, debit or credit cards, aggregating to Rs 10 lakh also needs to be reported.