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Beware of These 6 Cash Transactions to Avoid Trouble With Income Tax

by Abbey

Are you ready to discuss something that might catch you off guard if you aren’t diligent with your monetary proceedings? Your high-value cash transactions with other businesses and banks can trigger a notification from the IRS (Indian Revenue Service). Yes, you read that right!

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Revenue and tax authorities of India closely monitor various cash-related transactions and require businesses such as banks, mutual fund companies, and property registrars to report any interaction with cash that exceeds the specified limit.

This blog post shows you the 6 examples of high-value cash transactions that may land you in trouble. To avoid enquiries and notices from tax authorities, you must always steer clear of these kinds of cash dealings.

Cash Investments in Bonds, Stocks, Mutual Funds, Etc.

Investing in stocks, bonds, mutual funds, and debentures may be an excellent financial decision. But if you make a high-value cash investment, the income tax department might come knocking. Are you planning to make a big splash in the stock market? If so, make sure you are aware of the tax implications.

Whenever you trade in stock markets, mutual funds, debentures, and bonds, you need to include the value of your cash transactions in your ITR (Income Tax Return) if it exceeds RS 10 lakh per year.

Deposits of Cash Into Bank Accounts

You all appreciate the ease of cash deposits, don’t you? However, if you repeatedly deposit huge quantities of cash into your bank account, the income tax authorities may raise an eyebrow. They constantly watch for suspicious activities, and cash deposits might occasionally draw their notice. So keep this in mind before making large monetary deposits.

Generally, the cash deposit limit in savings accounts in banks is RS 10 Lakhs, and for the current account, it is RS 50 lakhs. But it may vary bank-to-bank. So check with your bank about the limit of cash deposits.

Cash Payments for Credit Card Bills

Paying off your credit card debts is a prudent step. But settling those large payments with cash may attract the attention of the income tax authorities. They regularly monitor credit card purchases, particularly cash transactions.

According to Central Board of Direct Taxes (CBDT) norms, cash payment of more than RS 1 lakh towards a credit card can be reported to authorities. Therefore, consider alternate payment options for settling credit card bills to prevent unwanted alerts.

Cash Deposit in a Fixed Deposit (FD)

It’s a good idea to protect your hard-earned money in fixed deposits. However, if you are thinking about making a large cash deposit into your FD account, be cautious! The income tax agency monitors these transactions.

When investing in FDs, it is always preferable to play it safe and use alternate modes of payment. It is worth noting that CBDT states that banks must disclose if a person deposits RS 10 lakh or more in one or more time deposits in a fiscal year.

Cash-On-Cash Real Estate Transactions

Another common cash transaction that may land you in trouble is done in real estate deals. While it may seem tempting to seal the purchase with a bag full of cash, the income tax department constantly monitors such transactions.

Any acquisition or sale of immovable property for RS 30 lakh or more in cash must be declared to tax authorities by the property registrar. So, think about different payment options to avoid drawing unwanted attention.

Foreign Exchange Purchase in Cash

Do you long for an exotic vacation? The income tax authorities may be watching you if you plan to acquire foreign currency with cash transactions. Cash purchases of forex cards, foreign debit or credit cards, or travellers’ cheques of more than RS 10 lakh arouse suspicions.

These cash purchases are generally reported to the income tax department. Thus it’s best to use other payment methods.

To conclude, it’s critical to be aware of the types of cash transactions that may land you in trouble. While these transactions are quick and provide some privacy, they can also raise red flags and draw unwelcome attention from authorities.

You may better protect yourself and stay on the right side of the law if you understand and avoid significant cash deposits or dubiously structured transactions. In today’s tech-savvy world, finding alternate payment methods, such as mobile or internet banking, should not be challenging.

Always seek expert guidance and adhere to the norms and guidelines established by appropriate authorities. Stay informed, be responsible, and keep your financial transactions hassle-free.

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