Income tax department One has become overly cautious against cash transactions these days. Over the years, the Income Tax Department and various investment platforms like banks, mutual fund houses, broker platforms, etc. have tightened the rules for cash transactions for the general public. Now, these investment and lending institutions allow cash transactions only up to a certain limit. In case of minor violations, the Income Tax Department can send a notice to the offender.
advising taxpayers to report high value cash transactions in their Income Tax Return (ITR); Amit Gupta, MD, SAG Infotech said, “If a person does high value cash transactions, there are chances that he/she may get a notice from the Income Tax Department. Various cash related transactions include banks, mutual fund houses, brokerages. and property registrars. High value transactions should always be reported to the Income Tax Department if the value exceeds a particular limit. The Income Tax Department has settlements with several government agencies to obtain financial records of individuals indulging in high value transactions. but do not report them on their tax filings.”
Income Tax Notices on Top 5 Cash Transactions that the Managing Director of a SEBI registered Income Tax Reconciliation Provider Company listed the following:
1]Bank Fixed Deposit (FD): Cash deposit in bank FD should not exceed 10 lakhs. The Central Board of Direct Taxes (CBDT) has announced that banks will have to disclose whether individual deposits exceed the prescribed limit in one or more fixed deposits.
2]Bank Savings Account Deposits: Cash deposit limit in bank account is 10 lakhs. If a savings account holder accumulates more than 10 lakhs during a financial year, the Income Tax Department can serve income tax notices. Meanwhile, cash deposits and withdrawals at a bank account crossing The limit of 10 lakhs in a financial year should be disclosed to the tax authorities. In current accounts, the limit is 50 lakhs.
3]Credit Card Bill Payment: As per CBDT norms, payment of 1 lakh or more in cash against credit card bills should be reported to the Income Tax Department. In addition, if the payment of 10 lakh or more is paid in a financial year to settle credit card bills, the payment will have to be disclosed to the tax department.
Amit Gupta said, “Any major transactions must be disclosed while filing ITR. If you are using a credit card on any high value transactions, file your ITR to avoid receiving income tax notices. Be sure to disclose them on Form 26AS in time.”
4]Sale or purchase of immovable property assets: The Registrar of Property shall disclose any investment or sale of immovable property for an amount of 30 lakh or more to the tax authorities. Therefore, in the purchase or sale of any immovable property, taxpayers are advised to report their cash transactions in Form 26AS as the property registrar will definitely report about the same.
5]Investing in Shares, Mutual Funds, Debentures and Bonds: Investors investing in mutual funds, stocks, bonds or debentures should ensure that their cash transactions in these investments are not high 10 lakh in a financial year. Income Tax Department has prepared an Annual Information Return (AIR) statement of financial transactions to trace the high value cash transactions of the taxpayers. The tax authorities will collect the details about unusually high value transactions on this basis in a particular financial year.
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