Bank Transactions That Trigger Income Tax Scrutiny
The Income Tax Department closely monitors bank transactions to prevent tax evasion and ensure compliance. Here are 9 common transactions that can trigger scrutiny :
1. Large Cash Deposits: Depositing â‚ą10 lakh or more in cash in your savings account in a financial year can lead to reporting to the tax department.
2. High-Value Credit Card Payments: Making large credit card payments, especially if your declared income doesn’t match your spending, can raise red flags.
3. Frequent Large Cash Transactions: Frequent large cash withdrawals or deposits in a savings account without a clear purpose can be marked as suspicious.
4. Property Transactions: Buying or selling property worth â‚ą30 lakh or more linked to your bank account can trigger automatic reporting to the tax department.
5. Foreign-Related Transactions: Transactions exceeding â‚ą10 lakh related to foreign travel, education abroad, or forex cards are tracked.
6. Dormant Account Activity: Sudden large amounts in a dormant bank account without prior activity can trigger investigation.
7. Mismatch in Interest/Dividends: Discrepancies between interest/dividends credited and declared in your tax return can lead to scrutiny.
8. Undeclared Interest Income: Having multiple bank accounts and not declaring interest income from all can create a mismatch.
9. Third-Party Transactions: Using someone else’s account for large transactions can lead to scrutiny for money laundering or unexplained funds.
To avoid issues, ensure your bank transactions align with your tax return and maintain clear documentation for large transactions .
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