To curb tax evasion / suppression of income, the CBDT has taken steps to collect data about taxpayer's financial transaction. The tax department compares this collected information with the return filed by taxpayers. Any mismatch intentional / error may lead to the generation of Income Tax Notice.
Few ways through which the tax department is monitoring taxpayer's high-value financial transactions:
Bank will inform the tax department deposited cash, made a demand draft or fixed deposits aggregating up to Rs. 10 lakh or more in a financial year under different accounts.
REGISTRAR OF PROPERTY
The property registrar is liable to report purchase or sale of immovable property exceeding Rs.30 lakh.
Now, TCS (tax collected at source) at the rate of 1 percent is deducted and deposited to the tax department by the buyer in case of purchase of property over Rs. 50 lakh. This is just another way of reporting the transaction.
CREDIT CARD PAYMENTS
If you have made a cash payment of Rs.1 lakh towards your credit card or Rs. 10 lakh or more through any other mode during the financial year, your credit card company will report the transactions to the tax authorities.
TRANSACTIONS IN SECURITIES
Purchase of shares, debentures and mutual funds of Rs. 10 lakh or more will have to be reported by the companies to the tax authorities.
ASSETS LIABILITIES SCHEDULE
If you are earning more than Rs. 50 lakh a year, you have to report your assets and liabilities in a new ITR (income tax return) form.
Now reporting of PAN is mandatory for making any purchase of goods and services of more than Rs. 2 lakh. Also, a TCS (tax collected at source) has been introduced from June 1 in case of purchase or sale of any goods and services for Rs. 2 lakh and more in cash.
TDS is another way of tracking income of taxpayers. Bank deduct tax on interest, tenant requires deducting tax if paying rent more than 50,000/- p.m. Etc.
A 1 percent luxury tax is levied on the purchase of car priced over Rs. 10 lakh. It will be deducted by the seller of the car and will be applicable on ex-showroom price. However, this extra payment could be set off against the total tax liability of the buyer.
SPECIFIED TRANSACTIONS WHERE PAN IS MANDATORY :
a) Sale or purchase of vehicles other than two-wheelers
b) Opening a bank or a demat account; applying for credit card
c) Opening a fixed deposit of more than Rs. 50,000
d) Payment of an amount aggregating to more than Rs. 50,000 in a financial year as life insurance premium to an insurer
e) Paying more than Rs. 50,000 in cash towards restaurant or hotel or foreign trip bills
f) Purchase of mutual funds, debenture, and bonds worth more than Rs. 50,000
g) Deposits of cash exceeding Rs. 50,000 during any one day with a banking company or a cooperative bank
a) The financial information vital to spot tax evaders will not just be taken from bank accounts, credit card spends, property, stock investments, cash purchases and deposits but also from social media sites, like photos of foreign tours, Expensive cars on Facebook, Instagram Etc.
b) Public functions such as Wedding / Birthday functions.
Please note this list is not exhaustive and only includes some of the most common ways.
Tags Income Tax