Income Tax Department monitors these high-value transactions and may issue notices.

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Income Tax Department monitors these high-value transactions and may issue notices

It’s important to understand that the Income Tax Department doesn’t track individual taxpayer transactions. Instead, it uses the Annual Information Statement (AIS) and Form 26AS. These two documents contain all of a taxpayer’s transactions, both large and small.

Income should be based on high-value transactions

Experts say that the Income Tax Department keeps track of every financial transaction of taxpayers. It particularly focuses on high-value transactions. This means that if someone makes high-value transactions but shows a significantly lower income in their income tax return, they are sure to come under the scrutiny of the Income Tax Department. The purpose of tracking high-value transactions is to curb cases of tax evasion.

There is a special eye on the data of deposits in the bank

The Income Tax Department monitors high-value transactions by taxpayers using data obtained from banks and financial institutions. Vivek Jalan, partner at Tax Connect Advisory Services LLP, said that under regulations, banks and other financial institutions are required to report various transactions to the Income Tax Department. For example, if an individual deposits more than ₹10 lakh in a savings account in a financial year, the bank must report this information to the Income Tax Department.

The Income Tax Department also becomes alert to excessive withdrawals.

If an individual withdraws or deposits more than ₹50 lakh from a current account, the bank must report this information to the Income Tax Department. If an individual pays a credit card bill (excluding cash) of ₹10 lakh in a financial year, the credit card issuing bank will report this information to the Income Tax Department. If ₹2 lakh is deposited into your account through the sale of goods or services, the department will receive this information.

These are the Income Tax Department’s biggest weapons.

It’s important to understand that the Income Tax Department doesn’t track individual taxpayer transactions. Instead, the department uses the Annual Information Statement (AIS) and Form 26AS. These two documents contain every transaction, big or small, of a taxpayer. For example, if you’ve bought or sold shares, this information will be included. If you’ve traded in the stock markets, this information will also be included.