5 cash transactions that can attract I-T notice Income tax
May, 07th 2021
In the last few years, Income Tax Department and various investment platforms like bank, mutual fund houses, broker platforms, etc. have been discouraging cash transaction by tightening their rules for public in general. Now a day, these institutions allow cash transaction to a certain limit and in case of slight violation, the Income Tax Department may send notice to the violator.
Speaking on the various cash transactions that may lead to income tax notice Mumbai-based tax and investment expert Balwant Jain said, "One needs to remain alert while doing any kind of high value cash transaction because the Income Tax Department has become highly vigilant about the cash transactions. Today it has various tools through which it will find out that one has done high value cash transaction. For example, if a person invests in stock market via demand draft using cash, the broker will report about the investment in its balance sheet. So, there is need to know the high value cash transaction limit and one should keep one's cash transactions inside that limit and avoid getting any kind of income tax notice."Pre-filled returns of income could prove to be a headache for taxpayers
Asked about the top 5 cash transactions that can attract income tax notice Balwant Jain listed out the following:
1] Savings/Current account: For an individual, the cash deposit limit in savings account is ₹1 lakh. If a savings account holder deposits more than ₹1 lakh in one's savings account, then the income tax department may send income tax notice. Similarly, for current account holders, the limit is ₹50 lakh and on violation of this limit may also liable for income tax notice.
2] Credit Card bill payment: While paying credit card bill, one should not cross ₹1 lakh limit. Violation of this cash limit in credit card bill payment doesn't go well with the Income Tax Department.
3] Bank FD (fixed deposit): Cash deposit in bank FD is allowed but it should not go beyond ₹10 lakh. Violation of this ₹10 lakh limit is also not advisable for a bank depositor making cash deposit in one's bank FD account.
4] Mutual fund/stock market/bond/debenture: People investing in mutual funds, stocks, bond or debenture must ensure that its cash infusion in the above mentioned investment options doesn't go beyond ₹10 lakh limit. Failing to maintain this cash infusion limit may lead to income tax department checking your last Income Tax Return (ITR).
5] Real estate: While buying or selling a property, one must make sure that cash transaction above ₹30 lakh is questionable as income tax department discourages cash transaction beyond this limit in a real estate deal.