Filing your Tax Return? Beware of these High-Value Transactions; Can get you Income Tax Notice

Every year Indian taxpayers must file their Income Tax Return (ITR) before the due date. This crucial task can’t be ignored. But watch out! The Income Tax Department might zoom in on certain big-money moves you make. Knowing which transactions could set off alarms helps you get ready and dodge potential hassles. Let’s dive into these eye-catching transactions:

Large Bank Account Transactions

The Income Tax Department keeps its eyes closely on transactions of more than Rs.10 lakh in a year from savings accounts. These transaction reports are sent to the tax authorities by the bank. Make sure to maintain proper documentation of all these transactions with a clear source of funds. Do regular review of your bank statements to stay on top of any significant activities.

Fixed Deposit Investments

Investing in Fixed Deposits (FDs) is a good way of saving your earnings. But if you are investing Rs.10 lakh or more than that in a fixed deposit, the bank will report this to the tax authorities. This is done to make sure that the money deposited is legitimate and accounted for. Keeping records of the sources of funds used is important whether they are savings or incomes.

Significant Cash Payments

Another area where the Income Tax Department keeps its eye closely is Cash transactions. If payments are made of Rs.2 lakh or more in cash for reasons such as repayment of loans, or purchase of goods or services, it will attract the attention of the tax authorities. To avoid such attention you should use digital payments, cheques or bank transfers for large amounts. Also maintaining proper receipts and records can act as proof if required.

High Credit Card Spending

When your total annual credit card expenses cross Rs.1 lakh then these expenses details are reported to the tax authorities. Both domestic and international transactions are included in this. It is important to keep track of your credit card statements and have a clear explanation and proof of all your large expenses.

Buying or Selling Real Estate

Real estate transactions also attract the attention of the tax authorities that are of high value. Any property transaction valued at Rs.30 lakh or more whether bought or sold is reported.

Thresholds for the current period that mandates the declaration of the source of funds for property transactions in urban areas are Rs.50 lakhs and for rural areas are Rs.20 lakhs.

If you are engaging in such transactions, it is advised to maintain detailed records such as sale agreements, payment receipts and also the source of funds used. Moreover, make sure that all the payments related to the transaction are done through valid banking channels rather than cash to avoid problems.

Knowing about big transactions helps you to prevent unwanted attention from tax officials. Keep detailed records and use clear payment methods to make your tax filing a breeze. The secret? Stay open and keep a paper trail for all major transactions. This won’t just help you file taxes right – it’ll give you the confidence to tackle any questions or letters from the tax folks head-on.