Staying on the radar of the Income Tax Department isn’t something anyone wants. To avoid receiving tax notices or facing inquiries, it's crucial to be aware of transactions that are routinely monitored. Here are some financial moves that can draw unwanted attention.
High Credit Card Spending
If you spend more than Rs 10 lakhs annually through credit cards, the Income Tax Department gets notified. Such high-value transactions are seen as red flags, especially if your declared income doesn’t justify the spending.
Foreign Travel Expenses Over Rs 2 Lakhs
A foreign trip costing more than Rs 2 lakhs in a financial year can alert tax officials. This is automatically reported and may raise questions if your income records don’t support such expenses.
Cash Payment of Credit Card Bills
Paying Rs 1 lakh or more in cash towards your credit card bills is a major red flag. This is often linked with black money and money laundering, which can lead to penalties and inquiries.
Investments in Mutual Funds or Shares
Investing Rs 10 lakhs or more in mutual funds, stocks, or bonds in a year can also prompt scrutiny. The source of funds must be clearly declared in your returns, or you could receive a notice.
High-Value Property Transactions
Purchasing property worth more than Rs 30 lakhs is reported directly to the Income Tax Department. If your tax filings don’t reflect the capacity to make such a purchase, expect a follow-up.
Large Cash Deposits in Bank Accounts
Depositing over Rs 10 lakhs in cash in a single or multiple bank accounts is under the department’s watch. It’s essential to have valid income proofs for such deposits.
Cash Business Transactions
Conducting business transactions of Rs 50,000 or more in cash could attract attention. Frequent or large cash deals are seen as attempts to evade tax and may lead to inspections.
To stay hassle-free, ensure your financial activities align with your declared income. Keep records, file timely returns, and avoid large cash dealings. When in doubt, consult a qualified tax expert.
