With the deployment of advanced data analytics, the Income Tax Department is capable of identifying discrepancies between an individual’s declared income and their expenses.

This sophisticated cross-referencing involves analyzing data from various sources, including bank statements, property transactions, and investment portfolios, thereby constructing a detailed financial profile of taxpayers.

The department also leverages information from external sources like employers and stock exchanges to ensure the accuracy of income declarations and to identify potential tax evasion.

The document underscores several types of transactions that could attract the attention of the Income Tax Department, even when executed in cash. These include:

  • Large Cash Deposits in Savings Accounts: Deposits exceeding ₹10 lakh in a financial year across all savings accounts are flagged and reported to the Income Tax Department. The purpose behind this scrutiny is to ensure that the source of such funds is legitimate and corresponds with the taxpayer’s declared income.


  • Fixed Deposits Made with Cash: The same threshold of ₹10 lakh applies to cash deposits made for fixed deposits within a financial year. This regulation is aimed at monitoring large investments made in fixed deposits to ensure they are not a means of laundering unaccounted money.


  • Purchases of Shares, Mutual Funds, and Bonds in Cash: Investments exceeding ₹10 lakh in shares, mutual funds, or bonds, when made in cash, could trigger an inquiry by the Income Tax Department to verify the source of funds and to ensure compliance with tax laws.


  • Repaying Credit Card Bills in Cash: While there is no automatic scrutiny for repaying credit card bills in cash, payments exceeding ₹1 lakh might prompt the department to inquire about the source of funds.


  • Cash Transactions Related to Property Purchases: For property transactions exceeding ₹30 lakhs, the buyer must disclose the source of funds, a measure aimed at preventing money laundering and ensuring transparency in high-value transactions.


The narrative aims to dispel the common misconception that cashless transactions evade the scrutiny of the Income Tax Department. In reality, the department maintains a vigilant eye on all high-value transactions, regardless of whether they are conducted in cash or through digital means. Financial institutions are mandated to report transactions that exceed predetermined thresholds to the Income Tax Department, which includes a wide range of transactions from cash deposits and withdrawals to card payments and UPI transactions

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