Cash Transaction Rule Update: Income tax notice will come on these 5 cash transactions, new rules apply, In recent years, the Indian Income Tax Department has significantly increased its vigilance over cash transactions, aiming to curtail tax evasion and promote transparency in financial dealings. The tightening of cash transaction rules applies not only to individuals but also to various financial institutions, including banks, mutual fund houses, brokerage platforms, and more. It’s crucial for taxpayers to be aware of these regulations, as even a minor violation can lead to a notice from the Income Tax Department.
Here, we’ll delve into the specifics of these rules and explore five key transactions that can potentially land you in trouble if not properly reported and adhered to.
Cash Transaction Rule Update:
1. Bank Fixed Deposits (FDs):
Cash deposits in bank fixed deposits should not exceed Rs 10 lakh. The Central Board of Direct Taxes (CBDT) mandates that banks disclose whether individual deposits in one or more fixed deposits exceed this prescribed limit. Exceeding this limit may trigger scrutiny from the Income Tax Department.
2. Bank Savings Account Deposits:
For cash deposits in a bank account, the limit is set at ₹10 lakh. Depositing more than this amount during a financial year could prompt the Income Tax Department to issue a notice. Additionally, any cash deposits and withdrawals in a bank account that surpass the ₹10 lakh limit within a financial year must be reported to tax authorities. The cap for current accounts is ₹50 lakh.
3. Credit Card Bill Payments:
According to CBDT rules, cash payments of Rs 1 lakh or more made to settle credit card bills must be reported to the Income Tax Department. Furthermore, if an individual pays ₹10 lakh or more in a financial year to settle credit card bills, this payment should also be disclosed to the tax department. These rules aim to trace large financial transactions and ensure they are properly accounted for.
4. Sale or Purchase of Real Estate:
Property registrars are required to disclose to tax authorities any sale or purchase of immovable property for an amount exceeding ₹30 lakh. Therefore, individuals engaging in real estate transactions are advised to report their cash transactions accurately. It’s essential to record these transactions in Form 26AS, as the Registrar of Property will undoubtedly report such high-value deals.
5. Investment in Shares, Mutual Funds, Debentures, and Bonds:
Investors participating in the stock market, mutual funds, bonds, or debentures must ensure that their cash transactions within these investments do not exceed ₹10 lakh in a financial year. Staying within this limit ensures compliance with the Income Tax Department’s regulations.
To track high-value cash transactions, the Income Tax Department has introduced the Annual Information Return (AIR) statement of financial transactions. This tool allows tax authorities to collect details of unusually large cash transactions that occur in a given financial year. Consequently, taxpayers are encouraged to maintain meticulous records of their financial dealings and ensure that they fall within the prescribed limits.
In conclusion, staying compliant with cash transaction rules set by the Income Tax Department is imperative for all taxpayers. Failing to do so can result in unwanted scrutiny and potential legal consequences. It’s advisable to keep abreast of any updates or changes in these regulations to maintain a hassle-free financial life and contribute to the overall transparency of India’s financial system. Remember that adhering to these rules not only safeguards your financial interests but also contributes to the country’s economic well-being by combating tax evasion.