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The income tax department uses various data analysis techniques to trace non-filers of income tax returns or underreporting income. In this endeavour, the department is reaching out to various government departments to obtain information about individuals spending high amounts but not filing ITR or underreporting their income.
The taxpayer shall report transactions in the income tax return if the transactions are incurred in higher denominations and if they surpass a certain threshold. The department coordinates with various government agencies to obtain financial data of taxpayers indulged in high-value transactions but not reported while filing the ITR.
Here is a list of transactions for which a taxpayer may receive a notice from the Income Tax Department:
Sr. No. | Transaction | Threshold (Rs) | Authority concerned |
1 | Cash deposits in the fixed deposit account | 10,00,000 | Banks need to disclose a transaction if the amount deposited exceeds the threshold to the Director of Income Tax by filing Form 61A, known as Statement of Financial Transactions. |
2 | Cash deposit or withdrawal in a savings bank account | 10,00,000 | Banks need to disclose a transaction if the amount deposited exceeds the threshold to the Director of Income Tax by filing Form 61A, known as Statement of Financial Transactions. |
3 | Cash deposit or withdrawal in a current account | 50,00,000 | Banks need to disclose a transaction if the amount deposited exceeds the threshold to the Director of Income Tax by filing Form 61A, known as Statement of Financial Transactions. |
4 | Sale or purchase of an immovable property | 30,00,000 | The Property Registrar/Sub-registrar must report a transaction exceeding the threshold via Form 61A. |
5 | Investments in shares, mutual funds, debentures and bonds in cash *If the transaction is related to the sum transfer from one scheme to another, then reporting is not required. | 10,00,000 | Mutual Fund Trustee, Stock Exchange is required to report a transaction exceeding the threshold via Form 61A. |
6 | Payment of credit card bill in cash | 1,00,000 | Banks need to report transactions exceeding the threshold via Form 61A. |
7 | Payment of credit card by any mode other than cash such as NEFT, cheque etc. | 10,00,000 | Banks need to report transactions exceeding the threshold via Form 61A. |
8 | Sale of foreign currency | 10,00,000 | Banks need to report transactions exceeding the threshold via Form 61A. |
9 | Cash payment for purchasing bank draft or prepaid RBI instruments | 10,00,000 | Banks need to report transactions exceeding the threshold via Form 61A. |
Below are some of the measures taken by the department to trace high-value transactions:
Firstly a taxpayer must verify that the SFT transactions reported in the Form 26AS are correct. Subsequently, a taxpayer must ensure to report the said high-value transaction while filing the ITR, and the tax liability on the same has been accurately calculated. Any error or mismatch in reporting such transactions may trigger an income tax notice.
The income tax department has launched an e-campaign for the voluntary compliance of income tax for the convenience of taxpayers.
The campaign focuses on the assessees/taxpayers who are either:-
Under this e-campaign, the income tax department sends email/SMS to identified taxpayers to verify their financial transactions related to information received by the IT department from various sources such as SFT, TDS, TCS, etc. The department can collect information related to GST, imports/exports, transactions in securities, derivatives, commodities and mutual funds through various third parties.
If you have received an email or SMS for high-value transactions or non-filing of returns, you can respond to the income tax department by following the below steps:
Step 1: Log in to your income tax e-filing account.
Step 2: In the home page, go to ‘Pending Actions’> ‘e-Campaign (AY 2021-22 Onwards)’.
Step 3: After redirecting from the e-filing portal, the landing page of the e-campaign view will be displayed.
For example, in the case of non-filing of income tax returns, it will show the below information under the ‘e-Campaign’ list.
Following are the categories where the response is expected from the taxpayer under e-campaign:
Under the ‘Preliminary Response’ section, the taxpayer is expected to respond to relevant questions. The queries under the Preliminary Response section are based on campaign type (non-filing of return/certain high-value transactions done by the taxpayer).
For example, for campaign type – ‘Non-Filing of Income Tax Return’, the taxpayer is expected to submit a response whether an income tax return has been filed or not.
Step 1: Click on the ‘Provide Response’ button provided against the ‘Preliminary Response’ section.
Step 2: On the next page, respond by selecting the relevant drop-down.
Step 3: Provide additional details as required by the income tax department. For example, For the question ‘Whether Income Tax Return (ITR) has been filed?’ the following additional details are required:
Step 4: After filling in all the relevant information, submit the response. You can download the preliminary response submitted from the ‘Activity History’ screen.
If you don’t have active e-campaigns or e-verifications, you will get the message – No Compliance Record has been generated for you.
You have to provide feedback on the information under the e-campaign, where no feedback has been provided.
You must provide feedback on the L1 information, which is marked as ‘Expected’ as shown in the below screenshot.
To know more about how to give feedback, you can click on the link below:-
Submit feedback on information in AIS.
In this way, you can submit the response to the income tax department for the notice on the high-value transactions or non-filing of the income tax return.