In today’s digital age, many still prefer the simplicity and convenience of cash transactions. However, some use cash to avoid the scrutiny of the Income Tax Department. While small cash purchases aren’t an issue, certain high-value transactions can trigger a notice from the tax authorities. Let’s break down the key transactions that could land you in hot water.
1. Depositing Cash in Your Bank Account
If you deposit Rs 10 lakh or more in cash into your bank account within a financial year, the Central Board of Direct Taxes (CBDT) mandates that the bank report this to the Income Tax Department. This applies whether the amount is deposited in one go or spread across multiple accounts. The tax authorities may then ask you to explain the source of this large sum.
2. Cash Deposits in Fixed Deposits (FDs)
Similar to bank accounts, depositing more than Rs 10 lakh in cash into one or multiple Fixed Deposits (FDs) in a financial year will raise red flags. The Income Tax Department can question the origin of such substantial deposits.
3. Large Property Transactions
If you make a cash transaction of Rs 30 lakh or more when buying property, the property registrar is required to inform the Income Tax Department. Such a significant cash transaction will prompt the tax authorities to inquire about the source of the funds.
4. Paying Off Credit Card Bills
Paying your credit card bill in cash, especially if it amounts to Rs 1 lakh or more, can attract attention. Furthermore, if you make payments totaling Rs 10 lakh or more in any financial year by any means, the Income Tax Department might investigate the source of your funds.
5. Purchasing Shares, Mutual Funds, Debentures, or Bonds
Using a large amount of cash to buy shares, mutual funds, debentures, or bonds can also alert the Income Tax Department. Any transaction of Rs 10 lakh or more must be reported, and you may be asked to explain where the cash came from.
Understanding these rules can help you navigate your finances without attracting unnecessary scrutiny from the tax authorities. Stay informed and stay compliant!
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