December 22, 2008

Your Transactions that Income Tax Department Checks

The Income Tax Department in India receives annual information return from banks, financial institutions etc that gives the details of various high value transaction done in a year. There is a prescribed range of transactions which have to be mentioned in the return along with the PAN of the person who made the transactions. Following are the transactions that are reported to Income Tax Authorities :-

  1. Cash Deposits in Bank Accounts - Cash deposits aggregating to ten lakh rupees or more in a year in any savings account of a person maintained in that bank.
  2. Credit Card Transactions - Payments made against bills raised in respect of a credit card, aggregating to two lakh rupees or more in the year.
  3. Mutual Funds - Payment of an amount of two lakh rupees or more for acquiring units of a Mutual F.
  4. Debentures or Bonds- Payment of an amount of five lakh rupees or more for acquiring bonds or debentures issued by a Company or institution.
  5. Shares - Payment of an amount of one lakh rupees or more for acquiring shares issued by a Company.
  6. Immovable Property - Purchase or sale of immovable property valued at thirty lakh rupees or more.
  7. Reserve Bank of India Bonds - Payment of an amount or amounts aggregating to five lakh rupees or more in a year for bonds issued by the Reserve Bank of India.

If you have incurred such transactions, the income tax department may scan your income tax returns to see if you mentioned enough income in previous years to fund such transactions and may even call you to explain the transactions’ details. However there is nothing to worry or scared about in doing large amount transactions but be sure that you have enough documentation to explain the transactions.

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