One should not keep any unaccounted or undisclosed money, property or income popularly known as black money. If such a disclosure is made before its detection by the Income Tax Department, the chances of being trapped in a tax raid are minimized. A tax raid may also be conducted against a person in possession of undisclosed income or property not belonging to him but to someone else. It is therefore important for a person who is in possession or in custody of someone else’s jewellery or other valuables, etc. to ensure that they are duly accounted for.

Tips to Prevent Income Tax Raids

Do’S

1. Make correct disclosure of income in returns: One should make a full and true disclosure of one’s taxable & exempt income.

2. Comply with summons or notices to prevent a tax raid: – It is absolutely necessary to fairly and properly comply with the summons. Wherever this is not possible, proper adjournment should be sought. Co-operation on the part of a person, whether he is an income tax assessee or not, will ensure prevention of a raid.

3. How to declare exempted or non-taxable income:- When the entire picture is placed before the Assessing Officer, there is little scope or raid on the grounds of possessing undisclosed income.

4. Preserve important vouchers and other documentary evidence for the acquisition of assets: – It is vital to preserve important vouchers and/or other documentary evidence as proof for their acquisition. This is necessary to prove the acquisition of such assets in case an inadvertent income tax raid takes place and the assessee is called upon to prove the nature and source of acquisition.

5. How to prevent income tax raid on lockers & safe deposit vaults? :-The owner of a locker, should maintain a register recording its contents for disclosure if called upon by the income tax authorities with custodian to get a declaration from the owner regarding the nature and source of the articles to satisfy.

6.Where gold ornaments or jewelry have not been purchased by the owner but have been acquired by way of a gift on some ceremonial occasion or otherwise it is advisable that records carefully preserved.

7. Always make yourself updated about Income tax rules & statutory provisions of the Income Tax Law.

DON’TS

1. Don’t introduce fresh capital over Rs. 10 lakhs.

2. Don’t introduce new unsecured loans exceeding Rs. 25 lakhs.

3. Don’t investment more than 5 times Gross Receipts ( includes agricultural income).

4. Don’t sale property for lesser amount than Govt. Valuation.

5. Don’t pay Commission above Rs. 10 lakhs.

6. Don’t declare profit less than 5% of receipts if you are a contractor who’s GC Receipts exceed Rs. 1 Cr.

7. Don’t adopt project completion method if you are builder.

8. Avoid high value transaction – Few examples of High Value Transactions are:

  • If anyone deposit cash aggregating to Rs 10 Lakh rupees or more in a year in any savings account it is called as a high value transaction.
  • Payment in cash aggregating Rs 10 Lakh or more in a year for purchase of DD, Pay Orders or Bankers Cheque
  • Payment made in cash aggregating Rs 10 Lakh or more in a year for purchase of pre-paid instruments issued by RBI
  • A Cash deposit aggregating to Rs. 50 Lakh or more in a year in one or more current account of a person.
  • A Cash withdrawal aggregating to Rs. 50 Lakh or more in a year in one or more current account of a person.
  • Cash payment received for the amount exceeding Rs. 2 Lakh for the sale of goods or services by professional.
  • Credit card payment aggregating Rs.2 Lakh or above in a year is also considered as high value transaction

 (Republished with amendments)

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0 Comments

  1. k c agarwal says:

    i have no word to say, i am unable to understand, how to congratulate. IT IS A GOOD TIP TO THE ASSESSEEE AND PROFESSINAL. AGAIN THANKS

    C A K C AGARWAL, ALLD.

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