Beware of the 10 High-Value Financial Transactions that can bring you under the Radar of the ITD 

Taxpayers need to keep in mind high-value transactions they made while filing their income tax returns. The income tax department is using analytics to scrutinize data to find out people who have not filed income tax returns (ITR) or under-reported income despite doing a high-value transaction.

The tax department has recently launched a revised Form 26AS which is an annual tax statement that reflects details of all high-value transactions by a taxpayer. The change was implemented to push voluntary compliance, and ease e-filing of returns so that these transactions are included in calculating the correct tax liability while filing returns.

Let’s understand what these high-value transactions are and how the income tax department gets information about them.

1. Statement of Financial Transactions (SFT)

The SFT is a report of specified financial transactions by specified persons including prescribed reporting financial institution. Such specified persons who register, maintain or record such specified financial transactions are under a mandate to submit SFT to the income tax authority or such other specified authority or agency. These specified entities, including banks, mutual funds, institutions issuing bonds and registrars or sub-registrars, have to file the SFT containing details of high-value transactions.

Examples Firstly, a bank has to file an SFT when the aggregate cash deposits of all the savings bank accounts of a client exceed  Rs.10 lakh in a year.

Secondly, registrars have to file SFT for every individual involved in any transaction of an immovable property where the deal value exceeds  Rs.30 lakh.

Thirdly, if you have bought financial instruments such as mutual funds, bonds and shares worth  Rs.10 lakh or more, it will be reported to the tax department by the issuer.

Fourthly, if you have purchased goods and services and have done a payment of  Rs.2 lakh or more in cash, then the seller will have to report it in the SFT, if it is liable for audit under Section 44AB.

Fifthly, taxpayers with sales exceeding  Rs.1 crore or receipts from a profession exceeding  Rs.50 lakh are required to file ITR with an audit report.

2. Domestic business-class air travel; payment of educational fee/donations; purchase of jewellery, white goods, paintings, marble and electricity consumption

The government recently proposed to expand the scope of reporting of SFTs by including new high-value transactions, such as domestic business-class air travel/foreign travel; payment of educational fee/donations; purchase of jewellery, white goods, paintings, marble and electricity consumption above Rs.1 lakh.

3. Payment of life insurance policy and payment of health insurance premium

The life insurance premium payment over Rs.50,000 and  payment of health insurance premium more than Rs.Rs.20,000 may come under the scanner of the Income-tax Department as it plans to expand the scope of reportable financial transactions under the SFTs.

4. Hotel spends above Rs.20,000

The Hotel spends above Rs.20,000 may come under Income Tax Department’s radar.

5. Investments in Financial Securities

A company has to report receipt of Rs 10 lakh or more from a person/an investor in a financial year for acquiring bonds, debentures, shares or mutual funds (other than the amount received on account of transfer from one scheme to another scheme of that Mutual Fund).

6. Credit Card Bill Payments

If you make Credit Card bill payments of more than Rs 1 Lakh p.a in cash mode (or) Rs more than Rs 10 Lakh through Cheques / NEFT transfers etc.

7. Deposits in Current Accounts

Cash deposits or withdrawals aggregating to Rs 50 lakh or more in a financial year in one or more Current Account of a person will have to be reported by the bank to the Income Tax authorities. Any cash payment of Rs 10 lakh or more in a financial year for purchase of bank drafts or pre-paid instruments issued by RBI will also be reported.

8. Cash Deposits in Banks

Banks will have to report cash deposits aggregating Rs 10 lakh or more in a financial year in one or more accounts (other than Current Account or Time Deposit) of a person.

9. Immovable Property

The Registrar of properties will have to report purchase & sale of all immovable property exceeding Rs 30 Lakh to the Income Tax authorities.

10. Sale of foreign currency

An authorised person as referred to in clause (c) of section 2 of the Foreign Exchange Management Act, 1999, needs to report the receipts from any person of an amount aggregating to Rs 10 lakh or more in a financial year for the sale of foreign currency.

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