Types of high value transactions under income tax Act, 1961
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It is mandatory to report all high value transactions in the prescribed format by the banks and all other financial institutions. The prescribed format is called as a Form 61A or Annual Information Return (AIR). The transactions done in the high denomination is known as high value transactions. All high value transactions are tracked closely by the Income Tax department. Any mismatch found in Income reported in ITR vs investment/expenditure may lead to Income tax notice. So, you need to be very careful while doing financial transactions.
Some examples of such transactions are:-
- If anyone deposits cash aggregating to Rs 10 Lakh rupees or more in a year in any savings account it is called as a high value transaction.
- Payment in cash aggregating Rs 10 Lakh or more in a year for purchase of DD, Pay Orders or Bankers Cheque
- Payment made in cash aggregating Rs 10 Lakh or more in a year for purchase of pre-paid instruments issued by RBI
- A Cash deposit aggregating to Rs. 50 Lakh or more in a year in one or more current account of a person.
- A Cash withdrawal aggregating to Rs. 50 Lakh or more in a year in one or more current account of a person.
- A cash deposit in any bank account above Rs. 2.5 Lakh after note ban i.e from 9th Nov, 2016 to 30th Dec, 2016.
- A cash deposit in current account above Rs 12.5 Lakh after note ban i.e from 9th Nov, 2016 to 30th Dec, 2016.
- One or more term deposit (other than renewal) aggregating to Rs. 10 Lakh or above.
- Sale or purchase of immovable property for an amount exceeding Rs. 30 Lakh or above
- Credit card payment aggregating to Rs 1 lakh or more in cash or Rs 10 lakh or more by any other mode in a FY is also considered as high value transaction.
- An expense in foreign currency via debit card, credit card or traveler’s cheque for the amount exceeding Rs.10 Lakh or above in a year.
- A receipt of amount aggregating to Rs.10 Lakh or above in a year for the purchase of shares issued by the company.
- A receipt of amount aggregating to Rs.10 Lakh or above in a year for the purchase of bonds, debentures.
- Receipt from any person of an amount aggregating to Rs.10 Lakh or above in a year for purchase of units of a Mutual Fund
- Cash payment received for the amount exceeding Rs. 2 Lakh for the sale of goods or services by professional.
Way to track your high value transactions:-
All high value transactions reported by third parties are visible in Form 26 AS. Form 26S is a consolidated annual tax statement issued by the IT department every year. You can download Form 26AS from Income tax filing website. Form 26AS shows how much tax is credited to your account from various sources like salary, pension, interest income etc. Apart from this Part E of Form 26AS contains AIR transaction information.
The details of cash deposited in your accounts can also be obtained from Income tax e-filing website. In order to know all cash deposit in your account login to e-filing portal and click on “Compliance” menu. You will find a tab called as “Accounts with Cash Transactions”.
What should you do?
In order to avoid income tax notice or scrutiny you should do following things.
- You should pay income tax honestly based on applicable tax slab.
- You should disclose your correct income in ITR.
- Avoid High value transaction.
- Check part E of 26 AS for high value transactions.
- If it is necessary to do high value transaction you should be in a position to justify the source of income.
- You should mention PAN card details while doing high value transactions.
Note: - Remember consequences of doing high value transactions are very scary. It may lead to income tax notice, penalty, and scrutiny. Be careful in doing high value transactions.
The scope of Statement of Financial Transactions (SFT) has been expanded to widen the tax base. Once the CBDT releases the notification in this regard, the notified persons should report the following transactions in their SFT:
- Payment to hotels above Rs. 20,000
- Payment of property tax above Rs.20,000
- Payment of health insurance premium above Rs.20,000
- Payment of rent above Rs.40,000
- Payment of life insurance premium above Rs.50,000
- Electricity consumption above Rs.1 lakh
- Payment of educational fee/donations above Rs.1 lakh p.a
- Purchase of jewellery, white goods, painting, marble etc. above Rs.1 lakh
- Deposit/credits in the current account above Rs.50 lakh
- Deposit/credits in the non-current account such as savings accounts above Rs.25 lakh
- Domestic business class air travel or foreign travel
- Share transactions/D-MAT accounts/Bank lockers
Also, it is to be noted that the following persons should file their SFT return mandatorily:
- A person having bank transactions above Rs.30 lakhs
- All professionals and business having turnover above Rs 50 lakhs