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Income Tax Dept Can Now Track Your UPI Payments – Are You Under the Radar in 2025?

Table of Contents:

  1. What Changed in 2025?
  2. How the IT Department Tracks You
  3. What Type of Transactions Are Flagged
  4. How to Stay Safe: Practical Tips
  5. FAQ

 What Changed in 2025?

Starting April 1, 2025, the Income Tax Department has enhanced its data-sharing network with:

  • Banks
  • Payment apps (like Google Pay, PhonePe, Paytm)
  • NPCI (which runs UPI)

This means your digital transactions, including UPI payments, are now under deeper scrutiny—especially high-value ones.

 All this data flows into your AIS (Annual Information Statement) and Form 26AS, and is matched with your ITR.

 How the IT Department Tracks You

The department uses AI-based algorithms to:

  • Scan UPI and NEFT transactions
  • Detect sudden spikes in personal spending
  • Cross-check whether income declared in ITR justifies your spending

Example:
If you earn ₹6 lakh a year but spend ₹10 lakh via UPI on luxury items or transfers, your account could be flagged.

 What Type of Transactions Are Flagged

Be careful if you’re doing any of these frequently:

Also flagged:

  • Gifting large amounts via UPI without PAN linkage
  • High-value merchant payments not shown in ITR

 How to Stay Safe: Practical Tips

  1. Link your PAN to UPI apps to stay traceable and compliant
  2. Report all major income sources in your ITR (freelance, crypto, stock profits)
  3. Avoid splitting large payments across multiple UPI accounts to dodge visibility
  4. Track your AIS every quarter – if the Income Tax portal has more info than your ITR, that’s a red flag

 FAQ

Q1: Are UPI transactions taxable by default?
No, UPI itself isn’t taxed. But the nature of payment (e.g., business vs. personal) can trigger tax liability.

Q2: Do I need to show every UPI spend in ITR?
No, but if your lifestyle shows higher expenses than your declared income, that gap must be justified.

Q3: What happens if flagged?
You may receive a compliance notice under Section 133(6) or 148A asking for explanation or reassessment.

 Quick Tip: If you’re earning income from multiple sources (side hustle, online sales, investments), consider filing under Presumptive Taxation to avoid under-reporting issues.

 For real-time alerts on new income tax rules, high-value reporting changes, and tax-saving tips — follow Stox N Tax and subscribe to our push notifications.

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