Is there anyone who would like to entrap in any litigation? I think no one wants unnecessary legal papers to showcase on their email or physically sit on their table. Well, but knowingly or unknowingly, we welcome a few notices from various tax departments due to lack of information.
One of such alarming notices is from the Income Tax department, which can knock on your door any time if someone breaks its rules.
The Income-tax department keeps on updating all its rules to curb tax evasion from our day-to-day life in every way possible.
And cash is one of the best ways one can evade the tax from the tax departments. So, Indian government had taken a few takes to limit its existence.
Let’s discuss a few such high-value transactions that Income Tax can easily track.
1.Cash payment for purchasing bank drafts, purchase of pay order, and banker cheques for rupees of ten lakhs or more during the financial year.
This transaction can be in a single transaction or different transactions; if the overall amount exceeds ten lakhs in cash payment for that particular financial year, you may face the Income-tax notice, which may include a question of your sources of funds for doing this transaction through cash.
2.Cash deposit or withdrawal: If you are depositing or withdrawing cash for rupees fifty lakhs or more than fifty lakhs in your current account within the financial year, be it a single transaction or in different transactions, you may invite a notice from the income tax department.
3.Withdrawal or deposit of money on a saving account: If you withdraw or deposit cash in your saving account, it should not be more than ten lakhs or more. It counts the transactions whether it is made on a single one or multiple ones in a year; if it touches ten lakhs or more in a financial year, the department may send you a notice.
4.Transaction on fixed deposits: If you are making a new fixed deposit for rupees ten lakhs or more in a particular financial year, then you may face notice questioning about your source of income. This is applicable only for the new fixed deposits and not on older ones in a row for review.
5.Cash payment of the credit cards: If you have paid rupees ten lakhs or more in other than cash or rupees one lakh or more in cash for payment of credit card in a financial year, then you may get a notice from the department.
6.Purchase and sale of property: If you have a property and want to hold it for thirty lakhs or more, you may invite needless income tax compliance if you are dealing with cash.
7.Purchase of goods and services: If you purchase any goods or services for rupees two lakhs or more in cash, you can also face the income tax notice.
If you want to save yourself from getting into the trap, then you need to disclose all these transactions in your Income-tax return
So, take a closer look at your transactions and as much as possible limit your cash transactions if you don’t want to get a notice.