Income tax notice: If you have made the 5 types of transactions mentioned here in cash, the Income Tax Department can send you a notice and an investigation can also begin.
Income Tax Dept Cracking Down on Cash Transactions: The Income Tax Department now uses modern tools like data analytics and artificial intelligence to catch the difference between your income and expenditure. Along with bank statements, investment, property deals and travel related information, data is also taken from the company, travel agency and stock exchange. If a big difference is found in income and expenditure, the department can send a notice and investigation can also be started.
Both digital and cash transactions are monitored
If you think that the tax department only focuses on digital transactions, then this is a misunderstanding. Banks and other financial institutions have to give information to the tax department about every transaction that exceeds the prescribed limit, whether it is in cash or through UPI or card payment. Now let’s know about 5 such cash transactions, due to which you can get an income tax notice:
1. Large cash deposit in savings account
If you have deposited Rs 10 lakh or more in cash in your savings account in a financial year (between 1 April and 31 March), whether in a single account or in multiple accounts, then the bank will inform the tax department about this. This does not mean that you have evaded tax, but the department will definitely ask you about the source of the money. If the answer is not satisfactory or does not match your income, then a penalty may also be imposed.
2. Making FD in cash
If you have made a fixed deposit (FD) of Rs 10 lakh or more in cash in a year, then it can also come under the radar of Income Tax. Even if you have deposited the amount by dividing it in many banks, but if the total amount is more than 10 lakh, then the information will go to the tax department. Therefore, it is important to have a clear source of money used for FD.
3. Cash investment in shares, mutual funds or bonds
If you have invested Rs 10 lakh or more in cash in shares, mutual funds, bonds or debentures, then its information also reaches the department. Although this does not bring an immediate notice, but if there is a big difference in your income and investment, then an investigation can be done. Investment in cash is viewed with suspicion because there is no digital record of it.
4. Paying credit card bill in cash
If you pay a credit card bill of Rs 1 lakh or more in cash every month, then this transaction also goes into the records of the tax department. Initially, you may not get a notice, but if this happens repeatedly, then the department can ask where so much cash came from. Therefore, it is better to do such big transactions through digital mode.
5. Cash payment while buying property
If you buy a property worth Rs 30 lakh or more, then you have to tell the source of the money. This limit can be Rs 50 lakh in urban areas and Rs 20 lakh in rural areas. In some states, these rules are even stricter. If you have made a cash payment for the property and its source is not disclosed correctly, then the tax department can take action.
The Income Tax Department now keeps a close watch on every small and big cash transaction. Therefore, if you are making a big transaction in cash, then its source must be clear. Otherwise you may get a notice and the investigation process can begin.
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