In today’s time, most of the people are connected to the banking system. After Jan Dhan Yojana, banking services have reached every village. People deposit, withdraw money from their bank account and make online payments.
But very few people know that the Income Tax Department keeps a close watch on many transactions taking place in your bank account. After the increase in digital transactions, the tax department has also strengthened its monitoring and data analysis system. Now banks, post offices, mutual fund houses and registry offices send SFT reports every year, which contain information about large or suspicious transactions. Its purpose is to catch tax evasion and anonymous transactions.
1. Cash deposit of more than Rs 10 lakh in the bank
If you deposit Rs 10 lakh or more in cash in your bank account in a financial year, the bank reports it to the Income Tax Department. This is not illegal, but the department may ask you about its source. Therefore, if there is gift, property sale or business income, then definitely keep the documents safely.
2. Frequent or large cash withdrawals
If you regularly withdraw large amounts of money in cash or suddenly the activity of cash withdrawal from your account increases, then this also comes under the notice of the department. Especially if it does not match your declared income.
3. Paying Huge Credit Card Bills
If your salary or income is low, but you are paying huge credit card bills every month, then the department may suspect that your real income is something else and is stated in the ITR. In such cases investigation can be started.
4. Multiple bank accounts and hidden interest
Many people open multiple accounts in different banks and do not include small interest or transactions in ITR. But now due to PAN and Aadhaar linking, all this information is automatically visible in the income tax system. You may get a notice for hiding interest.
5. Money deposited from undislosed source
If a large amount is deposited in your account and you are not able to show the documents of its source like loan from friends, gift or cash savings, then it can be considered as undeclared income and penalty can also be imposed along with tax.
6. Buying and selling of property worth Rs 30 lakh or more
If you buy or sell a property whose value is Rs 30 lakh or more, the registry department itself reports it to the Income Tax. After this the tax department checks from where you got such a huge amount.
7. Foreign transactions and foreign exchange expenses
If you spend Rs 10 lakh or more on foreign travel, studies, treatment or forex through the card, this transaction is also reported. On high foreign expenses the department matches your income and tax history.
8. Suddenly huge amount in dormant account
If a large amount of money is suddenly deposited or transferred to an account that has been inactive for a long time, it is considered suspicious. In such cases the tax department can verify the source.
9. Irregularities in interest or dividends
If you have not shown mutual fund dividend, bank interest or FD interest in ITR, then the department captures it through its auto-matching system. Notice can be received immediately on such irregularities.
10. Sending money or doing transactions for someone else
If you are using your account to transfer money to someone else, even if it is a relative, it can be considered as benami or money laundering activity. In such cases a big problem can arise.
How does the tax department catch it?
Every bank, financial institution, mutual fund house, registry office and post office sends SFT (Statement of Financial Transactions) every year. These reports contain a list of large transactions. The tax department matches it with PAN and Aadhaar and immediately knows the difference in income and expenditure of the person.