It is now mandatory to report entries of all bank transfers in your Income Tax Return (ITR) such as between one's own bank accounts, from UPI to wallet, wallet to UPI and interbank transfers as large self-transfers can raise red flags if not reported correctly.
Rs 50 Lakh Savings Rule
- If total deposits of an individual's savings bank deposit reach or exceed 50 lakh, even if your income is below the taxable limit, filing an ITR is mandatory.
- This requirement highlights the scrutiny on large transfers, as the government assumes that individuals with such high deposits would have earned interest on their savings or Fixed Deposits (FDs).
Self-contra entries: What They Are and Why They Matter
Self-contra entries refer to transactions circulating within an individual's own banks or accounts.
These include:
- Bank to other bank transfers.
- UPI to Bank and Bank to UPI transfers.
- Wallet to wallet, Wallet to Bank, and Bank to Wallet transfers.
While no income is generated, these transactions must still be reported due to visibility in bank statements.
How to Report in ITR?
- When filing ITR, you must select the relevant sections, such as foreign travel, taxable income, credit card usage, cash deposits, or current/savings accounts.
- You need to specify the total deposit amount across all your savings bank accounts and wallets, specifically noting contra entries.
- For example, if your total savings credit across all banks is ₹56 lakh, you must declare this amount.
- Include details - interest income and additional earnings like rewards or income from investments.
- Ensure that all transactions, especially UPI transfers and any interest accrued are accurately documented.
- Even if your actual income is below the taxable limit (e.g., less than ₹3 lakh), ITR filing becomes mandatory if your contra entries or deposits exceeds 50 lakh.
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