The Income Tax Department is tracking these common money moves for signs of tax evasion.
Vanshika verma | Oct 7, 2025 |
Avoid These 10 Money Moves That Can Attract an Income Tax Notice
The deadline for filing Income Tax Return (ITR) has passed, and now the Income Tax Department is investigating transactions made by individuals thoroughly. Several people, in an attempt to save on tax, make the mistake of hiding their income while filing returns. Keep in mind, if your income is underreported and your expenses are over-reported, you are sure to receive a notice from the Income Tax Department.
Know about 10 such transactions that the Income Tax Department keeps an eye on, and at the slightest suspicion, it sends a notice. Following are such transaction:
When a taxpayer reports less income in their Income Tax Return (ITR) but deposits a large sum of money into their bank account, the Income Tax Department may become suspicious. Such discrepancies can lead to the issuance of a notice asking for clarification about the source of funds.
If a taxpayer is earning income from rent but has not claimed its Tax Deducted at Source (TDS) in their ITR, the income tax department may identify the return for review.
When a person buys or sells multiple properties within a financial year without providing details about the source of funds, the Income Tax Department may issue a notice. The taxpayer must submit a detailed account of each property transaction.
If taxpayers have a large deposit in their bank account, then the department may inquire about the source. Keeping correct records is important.
If a taxpayer makes huge investments in the stock market, mutual funds, or initial public offerings (IPOs), or reports high profits, the department may ask for clarification. However, if the source of income is clear and well-documented, there is no need to worry.
Making cash payments of more than Rs. 2 lakh for any purchase automatically alerts the department. Such payments are likely to result in a notice seeking clarification.
As per Section 80TTA of the Income Tax Act, interest up to Rs. 10,000 earned from savings accounts in a financial year is tax-free for individuals and Hindu Undivided Families (HUFs). However, any amount exceeding this limit becomes taxable. Regardless of taxability, all savings account interest must be disclosed in the ITR.
If taxpayers do not report fixed deposits (FD) or rental income in ITR. The department may issue a notice and demand an explanation for the undisclosed earnings, as it will consider it as hidden income.
If an individual’s credit card expenses exceed their income, the department may question the source of the additional money. In such cases, the taxpayer will be required to provide valid proof and an explanation for the excess expenditure.
If a taxpayer spends a large amount on international travel while declaring low income in the ITR, the department may inquire, and the taxpayer may be required to explain the source of funds used for such expenses.
In case of any Doubt regarding Membership you can mail us at [email protected]
Join Studycafe's WhatsApp Group or Telegram Channel for Latest Updates on Government Job, Sarkari Naukri, Private Jobs, Income Tax, GST, Companies Act, Judgements and CA, CS, ICWA, and MUCH MORE!"
