Be Cautious Of These High-Value Cash Transactions

If a person conducts high-value cash transactions, he or she is likely to receive a notice from the Income Tax Department. If the value of the transaction exceeds a certain threshold limit, it must always be notified to the Income Tax Department. The I-T Department has reached agreements with a number of government entities to get financial records from individuals who engage in high-value transactions but fail to register them on their tax returns.

Several transactions for which you may receive a notice from the Income Tax Department:

1. Cash Investment in FDs

Although a fixed deposit can be made using cash, if a person deposits more than Rs.10 lakh in cash in a fiscal year, banks must notify the transaction to the income tax authorities. These new requirements apply to post office accounts as well.

2. Deposit of Cash into a Bank Account

An individual’s cash deposit limit in a savings account is Rs.1 lakh. If a savings account holder deposits more than this amount, the IT department may send a notification. Similarly, cash deposits or withdrawals totaling more than Rs.50 lakh in a person’s current accounts in a fiscal year should be reported to the IT department. Violation of this restriction may also result in an income tax notice.

3. Payment of Credit Card Bills

Your monthly credit card payment that exceeds the cash limit may now result in an income tax notice. If you pay a credit card bill of Rs.1 lakh or more, your credit card provider will report the transaction to the authorities. So, if you frequently use your credit card, you should exercise caution when paying your credit card bill with cash.

4. Real Estate Transactions

Cash can be used to buy or sell properties, but the total amount of cash involved in such transactions should not exceed Rs.30 lakh per transaction. If this occurs, the registrar of companies will notify the income tax department.

5. Investing in Stocks, Mutual Funds, Debentures, and Bonds

When a person invests in the stock market using a demand draught and cash, the broker records the transaction on the balance sheet. Individuals who participate in mutual funds, stocks, bonds, or debentures must guarantee that the cash component of their investment does not exceed Rs.10 lakh. Failure to keep this restriction may result in the income tax department auditing your most recent income tax return (ITR).

6. Purchasing Foreign Currency

Do you travel frequently? You should be aware that any purchase of foreign currency, whether travellers’ cheques, forex cards, debit cards, or credit cards, totaling more than Rs.10 lakh will be reported to the IT department and will very certainly result in a notification.

Final Thoughts

The income tax department has tightened the regulations on cash transactions in recent years. In the event of even the slightest infringement, the department can now issue an income tax notice. So, be mindful of the large cash transaction limit to avoid any legal wrangling.