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High-Value Financial Transactions tracked by the Income Tax Department

CA Sapna Ghelani 
on 21 April 2021

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In order to curb black money from the economy and for better compliance, the Income Tax Department has been taking a lot of measures regarding reporting of high value financial transactions. The taxpayers will have to inform the department with some transactions of high value while filing their income tax return.

When these reforms were made it was quoted that -

"It is a win-win for both honest taxpayers and the government where the initiative not only eases compliance but expected to add more taxpayers to the formal economy and collect more taxes."

Let us get into details of Specified Financial Transactions (SFT) and their minimum transaction limits

1. Investments in Financial Securities

A Company is bound to report its receipt of Rs 10 lakh or more from a person or 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).

2. Payment to Hotels

Reporting of payment of hotel bills above Rs.20,000

3. Payment of education fee and donations, Electricity consumption, Purchase of jewellery, white goods, paintings above Rs.1,00,000

4. Payment of life insurance policy and payment of health insurance premium

The life insurance premium payment over Rs. 50,000 and payment of health insurance premium more than Rs. 20,000.

High-Value Financial Transactions tracked by the Income Tax Department

5. Credit Card Bill Payments

Making of Credit Card bill payments of more than Rs. 1,00,000 p.a in cash mode or payment of more than Rs.10,00,000 through Cheques / NEFT transfers etc.

6. Deposits or Withdrawals in/from Current Accounts

Cash deposits or withdrawals aggregating to Rs. 50,00,000 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 Income Tax authorities.

Cash payment of Rs. 10,00,000 or more in a financial year for the purchase of bank drafts or pre-paid instruments issued by RBI will also be reported to the Income Tax Authorities.

Ensuting better compliance & transparency

 

Tabular Form

Sr No

Transactions

Value(in Rs.)

1.

Payment to Hotels, Payment of Property tax per annum, Health Insurance premium

20,000

2.

Life Insurance Premium

50,000

3.

Payment of educational fee / donations,

Electricity Consumption per year,

Purchase of Jewelry, white goods, painting, marble, etc,

Credit Card Payment in Cash

1,00,000

4.

Deposit / Credits in Current Accounts

50,00,000

5.

Deposit / Credits in non-current Accounts

25,00,000

6.

Credit Card payment in any mode other than cash, Purchase of Foreign Currency,

Purchase of Shares / Mutual Funds / Bonds / Debentures

10,00,000,

7.

Share transactions in DMAT Accounts / Bank Lockers

Any amount

8.

Domestic business-class air travel/foreign travel

Any amount

9.

Purchase or Sale of Immovable Property (House, Land, Apartment etc.)

30,00,000

10.

Cash Deposit in Savings Account,Term Deposits

10,00,000

 

How does the Income-Tax Department Come to Know About Your High-Value Transactions?

Some Reporting Authorities like Banks or Post offices, Registrars, Companies are mandated to inform about high-value transactions to the Director of Income-tax (Intelligence and Criminal Investigation) through the filing of Form 61A called Statement of Financial Transaction.

 

Through this form, the Income Tax Department comes to know about your high-value transactions. Department then verifies whether such a person has filed his income tax return or not and If the return is filed then whether income disclosed is true and taxes have been paid correctly or not.


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