 "Cash seized from Arpita Mukherjee's second home")
Cash deposits or withdrawals exceeding Rs 10 lakh (1 million) in a year in a savings account (except current accounts and fixed deposits) require reporting to the Income Tax department. Banks and post offices are responsible for reporting such transactions.
Certain high-value financial transactions in India can trigger scrutiny from tax authorities. Here is a checklist for you:
1. Cash transactions into savings account: " With respect to cash deposits aggregating to ten lakh rupees or more in a financial year, in one or more accounts (other than a current account and time deposit) of a person, statement of financial transaction is required to be furnished. Banking companies or cooperative banks along with the Post Master General are the prescribed reporting persons for cash deposits aggregating to ten lakh rupees or more in a financial year, in one or more accounts," said Amay Jain, Senior Associate, Victoriam Legalis - Advocates & Solicitors.
2. Cash Payments/Receipts: Cash payments or receipts exceeding Rs 2 lakh (0.2 million) for selling goods or services must also be reported. Businesses liable for audit under a specific tax section (Section 44AB) are responsible for reporting these transactions.
" Reporting person for the same shall be any person who is liable for audit under Section 44AB of the Income Tax Act. Such transactions along with other transactions set out in applicable rules, are to be reported to relevant reporting person/entity in accordance with Section - 285BA of the Income Tax Act, 1961 read with Rule-114E of the Income Tax Rules, 1962," said Jain.
3. High Credit Card Payments: Credit card payments exceeding Rs. 10 lakh (excluding cash advances) in a year might raise questions. Banks and cooperative banks report these transactions.
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" While credit cards offer convenience and flexibility, large payments may indicate substantial financial transactions that require proper documentation and reporting. Banking company or a co-operative bank would be the reporting person for such transactions," said Jain.
4. Real Estate Deals: Property purchases, sales, or transfers worth Rs. 30 lakh (3 million) or more require reporting. Registrars or sub-registrars of property deals are responsible for reporting these transactions.
"Whether it's purchasing, selling, or transferring property, accurate reporting of these transactions is required to avoid penalties and inquiries from tax authorities. Inspector-General or Registrar or Sub-Registrar would be the reporting person for such transaction," said Jain.
How to Avoid Scrutiny:
- Maintain Records: Keep meticulous records of all financial transactions.
- Understand Reporting Requirements: Section 285BA of the Income Tax Act specifies reporting requirements for high-value transactions.
- Report on Time: Report high-value transactions to the Income Tax department with details like income source and taxes paid.
- Seek Professional Help: Consult tax professionals or financial advisors for guidance on tax implications and compliance.
"To navigate these potential pitfalls effectively, taxpayers should maintain meticulous records of all financial transactions. The relevant provisions of the Income Tax Act pertaining to the reporting of high-value transactions are outlined in Section 285BA. This section mandates the furnishing of a statement of financial transactions or reportable accounts by specified persons, including banking companies, cooperative banks, and financial institutions, to the Income Tax Department. Timely reporting of high-value transactions to the Income Tax Department is crucial, including details such as the source of income and applicable taxes paid," added Jain.
By proactively disclosing high-value transactions and adhering to tax regulations, taxpayers can mitigate the risk of income tax notices and navigate the financial landscape with confidence. Compliance fosters transparency and trust in dealings with tax authorities, ultimately contributing to a smoother financial journey.
