Income Tax News: Beware! Property Transactions Beyond THIS Amount Can Attract Tax Notices, 5 High Value Cash Dealings to Avoid

In the age of Digital India, many people still prefer cash transactions. While small cash dealings are generally acceptable, large cash transactions often attract the attention of the Income Tax Department. To avoid scrutiny or penalties, it’s essential to understand the rules governing high-value cash transactions. Below, we explain five types of transactions that could lead to an Income Tax notice.

1. Depositing Cash in a Bank Account

If you deposit cash totaling Rs 10 lakh or more in a financial year across one or multiple accounts, banks are required to report this activity to the Income Tax Department, as per Central Board of Direct Taxes (CBDT) regulations. This could trigger an inquiry where you might need to explain the source of the funds.

2. Depositing Cash in Fixed Deposits (FDs)

Similar to regular deposits, cash investments exceeding Rs 10 lakh in fixed deposits in a financial year also come under scrutiny. Even if the amount is spread across multiple FDs, the bank informs the Income Tax Department, prompting potential questions about the origin of the money.

3. Cash Transactions in Property Deals

Property buyers should be cautious when dealing in cash. Any cash transaction of Rs 30 lakh or more during the purchase of property is flagged by the property registrar and reported to the Income Tax Department. This could lead to a notice requiring you to clarify the source of such a large sum.

4. Paying Credit Card Bills in Cash

If you clear credit card bills of Rs 1 lakh or more in cash, the Income Tax Department may ask for an explanation about the source of the cash. Moreover, if your total credit card bill payments exceed Rs 10 lakh in a financial year, regardless of the mode of payment, it can also attract scrutiny.

5. Buying Shares, Mutual Funds, Debentures, or Bonds

Large cash investments in financial instruments like shares, mutual funds, debentures, or bonds also raise red flags. If the total amount exceeds Rs 10 lakh in a financial year, the information is automatically reported to the Income Tax Department, which may then investigate the source of funds.

Conclusion

To avoid unnecessary hassles and legal troubles, it’s essential to keep your transactions transparent and ensure that your cash dealings remain within prescribed limits. Always maintain proper documentation and be ready to explain the source of funds for high-value transactions. Transitioning to digital or cheque payments for large amounts can help you avoid falling under the radar of the Income Tax Department.