These 5 Cash Transactions Can Bring You Notice From Income Tax Department

Now, the Income Tax (I-T) Department is keeping a close eye on transactions made by taxpayers. Hence, those who think the income tax department does not notice digital transactions, so the reality is different. Banks and financial institutions must report certain transactions to the Income Tax Department if they cross the set limit. These consist of UPI, card payments, cash deposits, and withdrawals.

The Income Tax Department uses modern tools such as data analytics and AI (artificial intelligence) to compare income and expenses. They collect information from bank statements, investments, property deals, your employer, travel agencies, and stock exchanges. If they find any mismatch, you could get a notice and may even face an investigation.

Let us look at 5 cash transactions that can put you on the radar of the department:

1. Large Cash Deposits in Savings Account

If you credit Rs. 10 lakh or more in cash in a financial year (April 1 to March 31), even if spread across multiple accounts, banks will report it to the tax department. It doesn’t mean you have not done anything wrong, but they may ask where the money came from. If your answer doesn’t match your income records, a penalty may follow.

2. Cash Fixed Deposits (FDs)

If you make FDs worth Rs. 10 lakh or more in cash in one year, the tax department may also take notice. Even if the amount is split between different banks, if the total goes over Rs. 10 lakh, it will be reported. So, it’s important to show clearly where the money came from.

3. Cash Investment in Shares, Mutual Funds, or Bonds

If you invest Rs. 10 lakh or more in cash in shares, mutual funds, or bonds, this, too, will be reported. You might not get a notice right away, but if your income doesn’t match the amount you invested, the department may investigate.

4. Paying Credit Card Bills in Cash

If you regularly pay credit card bills of Rs. 1 lakh or more in cash, this will be flagged. You may not get a notice at first, but repeating this can raise questions about the source of the cash. It’s better to make large payments digitally.

5. Cash Payments While Buying Property

When you buy a property worth Rs. 30 lakh or more, you must explain where the money came from. In cities, the limit is Rs. 50 lakh, and in rural areas, it’s Rs. 20 lakh. Some states may have stricter rules. If you pay a large part in cash, the department could investigate.