Income Tax Watch: Big Cash Transactions Can Land You in Trouble — Avoid These Mistakes!

Gone are the days when unreported cash dealings could escape the eyes of the Income Tax Department. In its latest drive against tax evasion, the department has tightened its grip on high-value cash transactions. Whether you deposit large sums in the bank or purchase assets with cash, these activities are now under strict surveillance.

Thanks to real-time data shared by banks, post offices, mutual funds, and financial institutions, the tax department is closely identifying individuals who either skip filing their Income Tax Return (ITR) or underreport their income despite large financial activity.

Which Transactions Are on the Radar?

The Income Tax Department monitors certain high-value financial moves. Institutions are bound to report these if they cross specific thresholds. The transactions include:

• Purchase and sale of immovable property

• Deposits over ₹10 lakh in fixed or recurring deposits

• Cash deposits in current accounts exceeding ₹1 crore

• Large payments for foreign travel (₹2 lakh or more)

• Electricity bill payments above ₹1 lakh

• Large-scale share, bond, debenture, or mutual fund investments

Additionally, if you exchange or transfer foreign currency worth ₹10 lakh or more, the data is reported under FEMA guidelines.

How Is the Income Tax Department Catching Tax Evasion?

The department uses multiple tech-backed tools to keep tabs on taxpayers' financial activity:

1. Form 26AS & AIS: Both documents now display Specified Financial Transactions (SFTs). If you’ve executed high-value deals, you’re expected to mention them while filing your ITR — failure to do so may trigger a tax notice.

2. TDS on Cash Withdrawals: If your cash withdrawals exceed ₹1 crore in a financial year, a 2% TDS is deducted. If you haven’t filed ITR for the last three years, even withdrawing over ₹20 lakh can attract TDS at 2%, while amounts beyond ₹1 crore will invite 5%.

3. Compulsory ITR Filing: Even if your annual income is below ₹2.5 lakh, filing ITR becomes mandatory if you engage in any of these:

   • Depositing ₹1 crore or more in a current account

   • Spending over ₹2 lakh on foreign travel

   • Paying an electricity bill exceeding ₹1 lakh annually

What If You See an SFT Entry in Form 26AS?

• Step 1: Cross-check the reported transaction for accuracy.

• Step 2: When filing your ITR, ensure the transaction is properly declared to avoid discrepancies.

• Step 3: If there’s a mismatch or you miss reporting the transaction, be prepared to receive an Income Tax notice.

Conclusion:
Transparency is now the core principle of the Indian tax system. Any major financial move, especially cash transactions, is being recorded and analyzed. To avoid legal trouble and penalties, it’s best to stay honest and report your income and transactions accurately in your ITR.