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Transacting in big-ticket or high-value cash transactions can land you in trouble with the Income Tax Department. There are various cash-related transactions that the tax man keeps a close watch on; entities like banks, mutual fund houses, brokerages and registrar of properties will have to inform the tax department if you transact via cash beyond the specified limit.

Income Tax Department and various investment platforms like bank, mutual fund houses, broker platforms, etc. have been discouraging cash transaction by tightening their rules for public in general. Now a day, these institutions allow cash transaction to a certain limit and in case of slight violation; the Income Tax Department may send notice to the violator.

In India, cash transactions are highly discouraged due to the volume of tax evasion that takes place. The government announces new provisions in the Income Tax Act from time to time to limit individuals and businesses’ amounts of cash. These limits are also set so that the income tax department can match the earnings of a person with his investments made and expenditure incurred. A violation of these limits could lead to the relevant financial institution or business entity reporting the transaction to the government and the government sending out an income tax notice to that individual. 

List of High Value Financial Transactions  

With an aim to curb black money mess and to track high value cash transactions, the government has decided to implement new reporting guidelines w.e.f November 2016, March 2017 & Aug 2020. As per the govt’s notification, all goods & services providers have to report to the IT department about high value cash transactions & cash receipts.

Under the new norms, cash receipts, purchase of shares, mutual funds, immovable property, term deposits, and sale of foreign currency will have to be reported to the tax authorities in a prescribed format, which is Form 61A

1. Cash Deposit in Savings account

For an individual, the cash deposit limit in savings account is Rs. 1 lakh. In case a savings account holder deposits more than ₹1 lakh in one’s savings account, then the income tax department may send income tax notice with regards such cash transactions. If you have two saving bank account and the total deposit exceeds Rs 10 lakh in a year, the Bank is required to report this to Income Tax department. In case assessee fails to report the income in the Income Tax Return than department may issue notice for Reassessment of income under the Income Tax Act, 1961.

2. Mutual Fund/Stock Market/Bond/Debenture

People investing in mutual funds, stocks, bond or debenture must ensure that its cash infusion in the above mentioned investment options doesn’t go beyond ₹10 lakh limit. Failing to maintain this cash infusion limit may lead to income tax department checking your last Income Tax Return (ITR).

3. Non Reporting of Savings Bank Interest / FDR Interest in ITR

The Bank submits report to the Income Tax Department providing details with respect to amount of savings bank interest and FD interest earned by a person during the financial year in case the person fails to report the same in the Income Tax Return than the same may lead to under reporting of income and due to this the department may issue notice with respect to under reporting of income. In order to avoid such thing the assessee must report all the saving bank interest or FD interest earned by him during the financial year.

4. Real Estate Investments

Buying or selling of properties can be done in cash. But the value of cash involved cannot exceed Rs.30 lakh per transaction. If it does, the Registrar of Companies will report the same to the IT authorities.

5. Payments to Businesses or Professionals

A business or professional will need to report any cash receipts exceeding Rs.2 lakh that has been received for the sale of goods or services. There are already several provisions limiting cash transactions for businesses and professionals with regard to various types of expenditure. However, a blanket restriction has been imposed on receiving cash exceeding Rs.2 lakh regarding a single transaction, or in respect of transactions from a person about one event, or aggregate per person per day.

6. Credit Card Bill Payments

Payments made of an amount aggregating to Rs 1 lakh or more in cash towards credit card dues will have to be reported, says CBDT. Further, if one pays Rs 10 lakh or more to settle credit card dues in a financial year (via any mode), these transactions will also have to be reported to the tax department.

Investments in Financial Securities : A company has to report receipt of Rs 10 lakh or more from a person/an investor in a financial year for acquiring bonds, debentures, shares or mutual funds (other than the amount received on account of transfer from one scheme to another scheme of that Mutual Fund).

7. Purchase of Foreign Exchange

Purchase of foreign exchange, which includes travellers cheque and forex cards, debit or credit cards, aggregating to Rs 10 lakh is reported to the tax department.

8.  High Value Cash Deposit in Current Account

If you cash deposit or cash withdraw more than Rs.50 lakhs to / from your current bank account than the bank will report it to Income Tax authority. Cash deposits or withdrawals aggregating to Rs 50 lakh or more in a financial year in one or more Current Account of a person will have to be reported by the bank to the I-T authorities. Any cash payment of Rs 10 lakh or more in a financial year for purchase of bank drafts or pre-paid instrument issued by RBI will also be reported.

List of Third parties who report High value Financial Transactions

  • Banks – They report High Value transactions related to deposits credit card payments.
  • Mutual Fund Companies
  • Companies issuing bonds or debentures
  • Companies issuing shares
  • Sub-Registrar offices on real-estate deals.

Also, it is mandatory that all the specified entities (third parties) to furnish an AIR in respect of specified financial transactions registered or recorded by them during the Financial Year.

All the above third party establishments have your PAN details and they quote PAN details of all the high value financial transactions recorded by them in AIR. They submit AIR to the income tax authority.

In which report can I trace the High Value Financial Transactions?

You can check your Form 26AS under AIR section if any investment or expense has been categorized as a high value transaction. You can find high value financial transaction details under PART-E of your Form 26AS. Click here to access your Form 26AS.

How do third parties report?

To keep a watch on high-value transactions by tax payers, the I-T department has developed a statement of financial transactions called Annual Information Return (AIR). On its basis, tax authorities will collect information on suspected high value transactions during a year.

FundsTiger can arrange loans from almost all the banks. You can apply for an attractive offer with the best possible rate of interest and terms for Personal Loan, Business Loan, Home Loan, and Car Refinance Loan.

Transacting in big-ticket or high-value cash transactions can land you in trouble with the Income Tax Department. There are various cash-related transactions that the tax man keeps a close watch on; entities like banks, mutual fund houses, brokerages and registrar of properties will have to inform the tax department if you transact via cash beyond the specified limit.

Income Tax Department and various investment platforms like bank, mutual fund houses, broker platforms, etc. have been discouraging cash transaction by tightening their rules for public in general. Now a day, these institutions allow cash transaction to a certain limit and in case of slight violation; the Income Tax Department may send notice to the violator.

In India, cash transactions are highly discouraged due to the volume of tax evasion that takes place. The government announces new provisions in the Income Tax Act from time to time to limit individuals and businesses’ amounts of cash. These limits are also set so that the income tax department can match the earnings of a person with his investments made and expenditure incurred. A violation of these limits could lead to the relevant financial institution or business entity reporting the transaction to the government and the government sending out an income tax notice to that individual. 

List of High Value Financial Transactions  

With an aim to curb black money mess and to track high value cash transactions, the government has decided to implement new reporting guidelines w.e.f November 2016, March 2017 & Aug 2020. As per the govt’s notification, all goods & services providers have to report to the IT department about high value cash transactions & cash receipts.

Under the new norms, cash receipts, purchase of shares, mutual funds, immovable property, term deposits, and sale of foreign currency will have to be reported to the tax authorities in a prescribed format, which is Form 61A

1. Cash Deposit in Savings account

For an individual, the cash deposit limit in savings account is Rs. 1 lakh. In case a savings account holder deposits more than ₹1 lakh in one’s savings account, then the income tax department may send income tax notice with regards such cash transactions. If you have two saving bank account and the total deposit exceeds Rs 10 lakh in a year, the Bank is required to report this to Income Tax department. In case assessee fails to report the income in the Income Tax Return than department may issue notice for Reassessment of income under the Income Tax Act, 1961.

2. Mutual Fund/Stock Market/Bond/Debenture

People investing in mutual funds, stocks, bond or debenture must ensure that its cash infusion in the above mentioned investment options doesn’t go beyond ₹10 lakh limit. Failing to maintain this cash infusion limit may lead to income tax department checking your last Income Tax Return (ITR).

3. Non Reporting of Savings Bank Interest / FDR Interest in ITR

The Bank submits report to the Income Tax Department providing details with respect to amount of savings bank interest and FD interest earned by a person during the financial year in case the person fails to report the same in the Income Tax Return than the same may lead to under reporting of income and due to this the department may issue notice with respect to under reporting of income. In order to avoid such thing the assessee must report all the saving bank interest or FD interest earned by him during the financial year.

4. Real Estate Investments

Buying or selling of properties can be done in cash. But the value of cash involved cannot exceed Rs.30 lakh per transaction. If it does, the Registrar of Companies will report the same to the IT authorities.

5. Payments to Businesses or Professionals

A business or professional will need to report any cash receipts exceeding Rs.2 lakh that has been received for the sale of goods or services. There are already several provisions limiting cash transactions for businesses and professionals with regard to various types of expenditure. However, a blanket restriction has been imposed on receiving cash exceeding Rs.2 lakh regarding a single transaction, or in respect of transactions from a person about one event, or aggregate per person per day.

6. Credit Card Bill Payments

Payments made of an amount aggregating to Rs 1 lakh or more in cash towards credit card dues will have to be reported, says CBDT. Further, if one pays Rs 10 lakh or more to settle credit card dues in a financial year (via any mode), these transactions will also have to be reported to the tax department.

Investments in Financial Securities : A company has to report receipt of Rs 10 lakh or more from a person/an investor in a financial year for acquiring bonds, debentures, shares or mutual funds (other than the amount received on account of transfer from one scheme to another scheme of that Mutual Fund).

7. Purchase of Foreign Exchange

Purchase of foreign exchange, which includes travellers cheque and forex cards, debit or credit cards, aggregating to Rs 10 lakh is reported to the tax department.

8.  High Value Cash Deposit in Current Account

If you cash deposit or cash withdraw more than Rs.50 lakhs to / from your current bank account than the bank will report it to Income Tax authority. Cash deposits or withdrawals aggregating to Rs 50 lakh or more in a financial year in one or more Current Account of a person will have to be reported by the bank to the I-T authorities. Any cash payment of Rs 10 lakh or more in a financial year for purchase of bank drafts or pre-paid instrument issued by RBI will also be reported.

List of Third parties who report High value Financial Transactions

  • Banks – They report High Value transactions related to deposits credit card payments.
  • Mutual Fund Companies
  • Companies issuing bonds or debentures
  • Companies issuing shares
  • Sub-Registrar offices on real-estate deals.

Also, it is mandatory that all the specified entities (third parties) to furnish an AIR in respect of specified financial transactions registered or recorded by them during the Financial Year.

All the above third party establishments have your PAN details and they quote PAN details of all the high value financial transactions recorded by them in AIR. They submit AIR to the income tax authority.

In which report can I trace the High Value Financial Transactions?

You can check your Form 26AS under AIR section if any investment or expense has been categorized as a high value transaction. You can find high value financial transaction details under PART-E of your Form 26AS. Click here to access your Form 26AS.

How do third parties report?

To keep a watch on high-value transactions by tax payers, the I-T department has developed a statement of financial transactions called Annual Information Return (AIR). On its basis, tax authorities will collect information on suspected high value transactions during a year.

FundsTiger can arrange loans from almost all the banks. You can apply for an attractive offer with the best possible rate of interest and terms for Personal Loan, Business Loan, Home Loan, and Car Refinance Loan.

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