How to Maintain Safe Distance from Income Tax Department

Obviously the Answer is YES!!! But the question here is HOW???

Article answer the following Questions what is the list of  expenses/ investments, why may invite undue attention from the Income tax Personnel, How does the Income tax Personnel get to know about your financial activities, What is Annual Information Report, Who provides the high value transaction information to prepare AIR, How can I trace my High Value Transactions reported under AIR and How to avoid receiving a notice from IT department.

List of expenses/ investments, which may invite undue attention from Income tax Personnel-

• Depositing Cash aggregating to Rs.10 Lacs p.a. in your Savings Bank Account.
• Making Credit Card Payments of Rs.1 Lacs or more in cash or Rs 10 lacs or more by any other mode in a financial year
• Investment in Mutual Fund Units worth more than Rs. 10 Lacs.
• Investment in Debentures/ Bonds, amounting more than Rs. 10 Lacs
• Investment in Shares worth more than Rs. 10 Lakh.
• Investment in Gold ETF worth more than Rs. 1 Lakh.
• Investment in RBI Bonds worth more than Rs. 5 Lacs.
• Purchase / Sale of any Immovable Property exceeding Rs.30 Lacs.
• Receipt of Cash Payment exceeding Rs.2 Lacs for sale of any goods/ services.
• Cash deposits or withdrawals aggregating to Rs 50 lakh or more in a financial year in one or more Current Account.

The Next question which may strike us, is

How does the Income tax Personnel get to know about all these activities.

• To keep an eye on such high value transactions of the tax payers, the IT Department has developed a statement of financial transactions called Annual Information Report (AIR).

On the basis of this AIR, the department shortlists their targets and further sends them a notice.

What do you mean by a Annual Information Report.

• Annual Information Return (AIR) of ‘high value financial transactions’ is required to be furnished under section 285 BA of the Income-tax Act, 1961 by ‘specified persons’ in respect of ‘specified transactions’ registered or recorded by them during the financial year.

Who provides the high value transaction information to prepare the AIR.

• Banks
• Mutual Fund Companies
• Companies Issuing Bonds/ Debentures
• Companies issuing shares
• Credit Card Companies
• Sub- registrar offices on real estate deals.

How can I trace my High Value Transactions reported under AIR.

• The assesse can trace his/ her high value transactions reported under AIR, in their 26AS Report under AIR section. Any transaction of the assesse which has been categorized as a High Value Transaction, will be reflected therein.

In the end, one last question which everyone might have.

How to avoid receiving a notice from the IT department.

• The most important step is to file your Income Tax returns on time and file them correctly.
• Always re-check your Tax Credit with the 26AS statement.
• Disclose all your Taxable as well as Exempt income under the right head.

The Author is a Chartered Accountant and can be reached at rrco1905@yahoo.com or 9920930544.

Disclaimer: The contents of this article are for information purposes only and does not constitute advice or a legal opinion and are personal views of the author. It is based upon relevant law and/or facts available at that point of time and prepared with due accuracy & reliability. Readers are requested to check and refer to relevant provisions of statute, latest judicial pronouncements, circulars, clarifications etc before acting on the basis of the above write up.  The possibility of other views on the subject matter cannot be ruled out. By the use of the said information, you agree that Author / TaxGuru is not responsible or liable in any manner for the authenticity, accuracy, completeness, errors or any kind of omissions in this piece of information for any action taken thereof. This is not any kind of advertisement or solicitation of work by a professional.

(Republished with Amendments by Team Taxguru)