You make payments, transfers, and cash deposits and withdrawals from your savings account every day, but did you know that even these everyday tasks can sometimes come under the scrutiny of the Income Tax Department? If you think that a savings account is simply a means of storing and spending money, know that these days the Income Tax Department can keep an eye on every major transaction. Especially if large amounts of money are frequently flowing into and out of your account, or you are making expenses that don't match your income.
You could receive an Income Tax Notice.
Experts say that banks and the tax department specifically track certain types of transactions. If these transactions don't match your income, you could receive a notice.
According to an ET report, chartered accountants Abhishek Soni and Tarun Kumar Madan say that even seemingly ordinary transactions can sometimes lead to an Income Tax investigation.
Let's explore 10 reasons that could put your savings account on the tax department's radar.
Deposited large amounts of cash in the bank?
If you deposit ₹10 lakh or more in cash in a single financial year, the bank reports it to the Income Tax Department. This isn't illegal, but you may have to disclose its source. Keep receipts related to gifts, property sales, or business income.
Made a large credit card payment?
If you make more than ₹1 lakh in cash or a total payment of more than ₹10 lakh on a credit card in a single year, this is reported. The department checks whether your lifestyle matches your income shown on your tax return.
Frequent or large cash withdrawals
Frequent large withdrawals from the account, or a sudden increase in cash flow, may also alert the bank. This may raise questions, especially if it doesn't match your income.
Property Deals Worth Rs 30 Lakh or More
If you've bought or sold a property valued at Rs 30 lakh or more (whether market rate or stamp value), the registrar reports it. The tax department looks at where you got the money.
Sudden Transactions in Inactive Accounts
If a previously inactive account suddenly becomes active and large transactions occur, the bank may flag it. In such a case, keep documents related to business, inheritance, or other valid reasons.
Spent or received large sums of money abroad?
If you made foreign transactions of Rs 10 lakh or more in a year, such as international card payments or forex, this could trigger an income tax notice, especially if your income appears to be less than that.
Difference Between Bank Interest and ITR
If the interest reported by your bank doesn't match your income tax return, you may receive a notice. Check your interest against Form 26AS and AIS (Annual Info Statement) and show everything correctly.
Savings account interest is less than Rs. 10,000, but don't hide it.
Even if your interest is less than Rs. 10,000, it will still be reflected in AIS. If you don't show it in your return, you may receive an automatic notice due to mismatched data.
Have multiple accounts, but haven't added the interest?
Having multiple savings accounts isn't a problem, but it's important to add the interest on all of them and show it in your ITR. The system is very sensitive and can catch even small errors.
Don't get caught making payments for others.
If you made a payment for someone else using your card during the festivals and they returned the money to you in cash, that too can be tracked. Once this money is credited to your account, you may exceed the reporting limit and receive a tax notice.
How to avoid the attention of the Income Tax Department?
The tax department monitors all large transactions through the PAN-based auto-reporting system. Therefore, you should keep these things in mind:
Check your AIS and Form 26AS before filing your ITR.
Keep documentation for every transaction.
When making transactions for others, keep everything clear and tracked.
Disclaimer: This content has been sourced and edited from NDTV India. While we have made modifications for clarity and presentation, the original content belongs to its respective authors and website. We do not claim ownership of the content.
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