How to Maintain Safe Distance from Income Tax Department?

In day to day transaction, we do some transaction which may attract Income Tax Department to serve you a notice ask about. But we always want to keep an Arm’s Length Distance from the Income Tax Department!

But the question here is HOW???

Here are lists of expenses/ investments, which at any point of time performed by you may invite undue attention from the Income tax Personnel.

1) Depositing Cash aggregating to Rs.10 Lacs p.a. in your Savings Bank Account.

2) Making Credit Card Payments of more than Rs.2 Lacs p.a.

3) Investment in Mutual Fund Units worth more than Rs. 2 Lacs.

4) Investment in Debentures/ Bonds, amounting more than Rs. 5 Lacs

5) Investment in Shares worth more than Rs. 1 Lakh.

6) Investment in Gold ETF worth more than Rs. 1 Lakh.

7) Investment in RBI Bonds worth more than Rs. 5 Lacs.

8) Purchase / Sale of any Immovable Property exceeding Rs.30 Lacs.

9) Receipt of Cash Payment exceeding Rs.2 Lacs for sale of any goods/ services.

10) Cash deposits or withdrawals aggregating to Rs 50 lakh or more in a financial year in one or more Current Account.

The Next question which may strike us is how does the Income tax Personnel get to know about all these activities.

To keep an eye on such high value transactions of the tax payers, the IT Department has developed a statement of financial transactions called Annual Information Report (AIR).

On the basis of this AIR, the department shortlists their targets and further sends them a notice.

What do you mean by a Annual Information Report (AIR).

Annual Information Return (AIR) of ‘high value financial transactions’ is required to be furnished under section 285 BA of the Income-tax Act, 1961 by ‘specified persons’ in respect of ‘specified transactions’ registered or recorded by them during the financial year.

Who provides the high value transaction information to prepare the AIR?

     Banks

       Mutual Fund Companies

     Companies Issuing Bonds/ Debentures

     Companies issuing shares

     Credit Card Companies

     Sub- registrar offices on real estate deals.

How can I trace my High Value Transactions reported under AIR?

The assessee can trace his/ her high value transactions reported under AIR, in their 26AS Report under AIR section. Any transaction of the assessee which has been categorized as a High Value Transaction will be reflected therein.

In the end, one last question which everyone might have. 

How to avoid receiving a notice from the IT department?

The most important step is to file your Income Tax returns on time and file them correctly.

Always re-check your Tax Credit with the 26AS statement.

Disclose all your Taxable as well as Exempt income under the right head.