Income Tax Dept cracks down on high spenders hiding income

The Income Tax Department is now using modern data analysis techniques to detect those who have hidden or shown less income. For this, the department is working with various government agencies to collect information about such individuals who spend heavily but do not report their income properly.

What is the new update?

The Central Board of Direct Taxes (CBDT) has directed Self-Reporting Organizations (SROs) such as banks, post offices, cooperatives, fintech companies, and mutual fund houses to provide complete information about high-value transactions made during the financial year by May 31 of the next financial year.

What are high-value transactions?

When a bank or institution deposits or withdraws a large amount in a person’s account, which exceeds a certain limit, it has to be reported to the Income Tax Department. This is reported under ‘Statement of Financial Transactions (SFT)’ in Form 61A or as a reportable account in Form 61B. This allows the department to keep track of the individual’s financial transactions and ensure tax compliance.

Which transactions are reportable to the Income Tax Department?

1. Cash payment against bank draft, pay order, bankers cheque or RBI prepaid instrument

Limit: Rs 10,00,000

Reporting: Banks or co-operative societies will report through Form 61A.

2. Cash deposit in savings bank account

Limit: Rs 10,00,000

Reporting: Banks, co-operative societies and post offices.

3. Cash deposit or withdrawal in current account

Limit: Rs 50,00,000

Reporting: Banks or co-operative societies.

4. Purchase or sale of immovable property

Limit: Rs 30,00,000

Reporting: Property Registrar or Sub-Registrar through Form 61A.

5. Cash investment in shares, mutual funds, debentures or bonds

Limit: Rs 10,00,000

Reporting: Related company or mutual fund trustee.

Note: No reporting if amount is transferred from one scheme to another.

6. Cash payment of credit card bill

Limit: Rs 1,00,000

Reporting: Banks or co-operative societies.

7. Non-cash payment of credit card bill

Limit: Rs 10,00,000

Reporting: Banks or co-operative societies.

8. Foreign exchange transactions (spending by forex card credit, debit/credit card or traveller’s cheque)

Limit: Rs 10,00,000

Reporting: Persons authorised under the Foreign Exchange Management Act.

9. Cash deposited in fixed deposit or recurring deposit

Limit: Rs 10,00,000

Reporting: Banks, cooperative societies, Nidhi companies and NBFCs.

Steps taken by the Income Tax Department

Improvement in Form 26AS: It now also shows the details of ‘Specified Financial Transaction’ (SFT). Also, ‘Annual Information Statement’ (AIS) has also been introduced, where taxpayers can view their financial information.

TDS on cash withdrawal: If someone’s cash withdrawal is more than Rs 1 crore, then 2% TDS will be deducted. For those who have not been filing ITR for the last three years, 2% TDS will be applicable on withdrawals above Rs 20 lakh and 5% TDS on withdrawals above Rs 1 crore.

ITR filing mandatory: If your income is more than Rs 2,50,000, then it is mandatory to file ITR. But from April 2019, it has become mandatory to file returns even if your income is low, if there are certain high-value transactions. Such as depositing more than Rs 1 crore in a current account of a bank or cooperative bank, spending more than Rs 2 lakh on foreign travel, or paying more than Rs 1 lakh in the electricity bill.

Source: FINANCIAL EXPRESS