In today’s digitized financial ecosystem, the Income Tax Department keeps a close watch on high-value transactions across bank accounts, credit cards, property, and even overseas travel. What may seem like routine financial activity to you could raise red flags if not properly reported in your Income Tax Return (ITR). Many taxpayers unknowingly make certain transactions that could put them under the scanner—even if they have no intention to evade taxes.
In this blog, we uncover 10 such common transactions that are regularly monitored by the tax authorities and explain why it's important to report them accurately. Ignorance is no longer an excuse—transparency is the key to staying tax-compliant.
1. Large Cash Deposits in Bank Accounts
If you deposit lakhs of rupees into your bank account but your Income Tax Return (ITR) reflects a much lower income—or worse, if you haven’t filed an ITR at all—it can raise red flags. The department may question the source of funds, and failure to provide a valid explanation can result in a notice.
2. Credit Card Payments Exceeding ₹10 Lakhs Annually
Whether it’s through EMIs or direct bill payments, if your annual credit card usage crosses ₹10 lakh and your declared income doesn’t support this level of spending, the tax authorities are likely to investigate. You will be required to justify the source of funds used to make such payments.
3. Mismatch in Form 26AS or AIS Data
With all tax records now digitized, the IT department compares the income reported in your ITR with data from Form 26AS and the Annual Information Statement (AIS). Any mismatch can automatically flag your profile for review and may trigger a tax notice.
4. Foreign Travel Expenses with Low Declared Income
Spending lavishly on international vacations while declaring a low income in your tax filings can appear suspicious. Travel agents and credit card companies report high-value foreign transactions to the government, enabling the department to question your financial capacity.
5. Frequent or High-Value Property Transactions
Buying or selling expensive properties, or engaging in frequent real estate transactions, can lead the tax department to scrutinize your finances. You must disclose the source of funds used and ensure these are declared correctly in your ITR.
6. Gains from Stock Market, IPOs, or Mutual Funds
If you’ve made significant profits from stocks, IPOs, or mutual fund investments, congratulations—but don’t forget to report these in your ITR. The Income Tax Department has access to investment data and may assume tax evasion if such income isn’t disclosed.
7. Ignoring Interest or Rental Income
Many believe that interest from fixed deposits or rental income is too small to declare. However, this assumption can be costly. The department monitors all income sources, and non-disclosure—even of small amounts—can lead to action against you.
8. High Deposits in Savings or Fixed Deposits
Depositing ₹10 lakh or more in your savings or fixed deposit accounts without declaring a clear source of income can prompt the tax department to issue a notice. Some individuals attempt to bypass this by labeling funds as gifts or inheritance, but solid proof is essential.
9. Undisclosed Rental Income
If you are a landlord earning a good amount from rent but fail to show this in your ITR, it’s a mistake. Rental income must be declared, and TDS (Tax Deducted at Source) rules must be followed. Concealing it may invite penalties.
10. Cash Transactions Above ₹2 Lakhs
The government is particularly sensitive to large cash transactions. If you purchase goods or services worth more than ₹2 lakh in cash, the seller is required to report it. This can easily lead to inquiries and potential penalties if not properly documented in your returns.
In conclusion, every high-value financial move you make—from deposits to travels, investments to property deals—is now under the surveillance net of the Income Tax Department. Make sure to declare all relevant transactions accurately in your ITR to avoid unnecessary notices or penalties.
Disclaimer:
This blog is for informational purposes only. Readers are advised to consult a certified tax professional for guidance tailored to their specific financial situation
