Introduction
The Income Tax Department closely monitors high-value financial transactions linked to your PAN and bank accounts. If you exceed certain transaction limits, your details are automatically reported to the department, increasing the chances of a tax scrutiny notice.
Common high-value transactions that trigger tax notices:
Large cash deposits and withdrawals
High-value property sales or purchases
Stock market investments and mutual fund redemptions
Foreign remittances exceeding ₹7 lakh
Credit card payments above the prescribed limits
This article explains which transactions can attract tax scrutiny, how to avoid unnecessary tax notices, and how to stay compliant.
1. List of High-Value Transactions That Are Reported to the Income Tax Department
Banks, mutual funds, stock exchanges, and registrars must report specific high-value transactions to the Income Tax Department under the Statement of Financial Transactions (SFT) framework.
| Transaction Type | Threshold Limit | Reported By |
|---|---|---|
| Cash Deposits in Savings Account | Above ₹10 lakh in a financial year | Banks & NBFCs |
| Cash Deposits in Current Account | Above ₹50 lakh in a financial year | Banks & NBFCs |
| Property Purchase or Sale | Transactions above ₹30 lakh | Registrar of Properties |
| Stock Market Investments (LTCG/STCG) | Above ₹1 lakh in a financial year (LTCG) | Stock Brokers & Exchanges |
| Mutual Fund Investments | Above ₹10 lakh in a financial year | Mutual Fund Companies |
| Credit Card Payments | Above ₹1 lakh (cash) or ₹10 lakh (total payment) | Banks |
| Foreign Remittances under LRS | Above ₹7 lakh in a financial year | Banks & Forex Dealers |
The Income Tax Department automatically tracks these transactions through the Annual Information Statement (AIS).
2. How These Transactions Are Reported in AIS and Form 26AS
- AIS (Annual Information Statement): Captures all high-value transactions, including stock market trades, real estate deals, and cash deposits.
- Form 26AS: Contains TDS deductions, foreign remittances, and major financial transactions linked to your PAN.
Before filing ITR, verify your AIS and Form 26AS to ensure accurate reporting.
3. Common Triggers for Tax Notices Due to High-Value Transactions
The following mismatches and reporting errors can trigger a tax notice:
1. Cash Deposits in Savings/Current Accounts Above Limits
Example: A business owner deposits ₹15 lakh in cash into a savings account in a year. This exceeds the ₹10 lakh threshold, and the bank reports it. If the person fails to declare this as business income, a tax notice may follow.
How to avoid a notice: Use banking channels for large transactions and declare the source of income in ITR.
2. Stock Market Transactions Not Reported in ITR
Example: An investor sells shares worth ₹5 lakh and makes a long-term capital gain (LTCG) of ₹2 lakh. Only ₹1 lakh is exempt, but they do not report the gain in their ITR.
What happens?
- The stockbroker reports the transaction to the Income Tax Department.
- If not declared in ITR, the taxpayer may receive a Section 148 notice for reassessment.
How to avoid a notice: Declare all capital gains in ITR, even if some are exempt.
3. Real Estate Transactions Above ₹30 Lakh
Example: A person buys an apartment for ₹50 lakh but does not mention it in ITR. The property registrar reports the purchase, but the taxpayer does not disclose the source of funds.
What happens?
- The IT Department matches PAN details with AIS records.
- If the source of funds is unclear, a tax notice may be issued under Section 133(6) for explanation.
How to avoid a notice: Always declare property transactions and capital gains correctly in ITR.
4. High-Value Foreign Remittances Under LRS
Example: A taxpayer sends ₹10 lakh to a foreign university for education fees but does not pay 5% TCS on amounts exceeding ₹7 lakh.
What happens?
- Banks report all foreign remittances exceeding ₹7 lakh.
- If TCS is not paid, a tax compliance notice under Section 206C(1G) may be issued.
How to avoid a notice: Pay 5% TCS on remittances above ₹7 lakh and claim it while filing ITR.
4. How to Avoid a Tax Notice Due to High-Value Transactions
Declare all major transactions in ITR, even if no tax is due.
Check AIS and Form 26AS before filing your return.
Avoid cash transactions above threshold limits.
Ensure capital gains are reported correctly to avoid mismatch with AIS.
If you receive a tax notice, respond within the given deadline.
Many taxpayers receive Section 148 reassessment notices due to mismatches in AIS vs. ITR. Verify AIS before filing ITR to avoid scrutiny.
5. FAQs on High-Value Transactions & Tax Notices
Q1: What should I do if I receive a tax notice for a high-value transaction?
Respond through the Income Tax e-filing portal with supporting documents. If required, file a revised ITR.
Q2: Will cash deposits below ₹10 lakh trigger a tax notice?
Cash deposits below ₹10 lakh may still be flagged if they are unusual or frequent.
Q3: What if my bank account receives multiple small deposits that add up to ₹10 lakh?
Even small deposits aggregating over ₹10 lakh in a financial year are reportable.
Q4: Can I get a tax notice for investing in stocks?
Yes, if you do not report capital gains in ITR, the tax department may issue a notice.
Q5: Does the IT Department monitor credit card spending?
Yes, banks report credit card payments above ₹1 lakh (cash) or ₹10 lakh (total) per year.
6. Conclusion: Ensure Compliance to Avoid Tax Scrutiny
High-value transactions are automatically reported to the Income Tax Department. To avoid unnecessary tax scrutiny:
Declare all major financial transactions in your ITR
Verify AIS and Form 26AS for accuracy
Avoid large cash transactions that exceed threshold limits
Ensure capital gains from stocks and property are reported correctly
Non-disclosure of high-value transactions can trigger reassessment and penalties, making compliance essential.
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