Deposited Rs. 10 Lakh or More? Here’s How to Avoid an Income Tax Notice

If you have recently deposited Rs. 10 lakh or more into your savings account, you might be wondering if you could receive an income tax notice on this amount.

If someone deposits a huge amount of money in a bank, then in such a case, the Income Tax Department may enquire about the source of the money. Therefore, it’s important to keep all proofs and records related to the payment.

Why does the Income Tax Department issue a notice?

Banks are required to report any cash deposits of Rs 10 lakh or more in an account in a financial year under the Income Tax Act. This information is then further sent to the Income Tax Department. The Department then sent a notice asking for the source of this money. If this money is already shown in your income and tax return, you don’t need to worry.

In case you fail to prove that the money is valid, the Income Tax Department can impose taxes and penalties under sections 68 and 69A. In such a case, the tax could be up to 60%, and your total tax liability, including surcharges and penalties, could reach 84%.

What Precautions Should you Take?

Following are some precautions which you must consider to avoid penalties:

• Provide PAN while depositing more than Rs. 50,000 in cash in the bank (Compulsory).
• On deposits of Rs 10 lakh or more in a year, the bank sends information to the government through an SFT report.
• If the money is from a sale, gift, salary, investment or any old withdrawal, then you should have its records/Proofs.
• The whole amount of the transaction must be mentioned while filing ITR.

Is it risky to deposit a large amount of money?

No, it’s totally fine. You can deposit 1.5 million rupees or more in a bank legally. Just make sure you keep proof of where the money came from.

Being open and clear about the source is important so that if the tax authorities ask, you can easily show the documents and avoid any trouble.