The income tax department uses various data analysis techniques to trace individuals who have not filed income tax returns or have underreported their income. As part of this effort, the department is collaborating with different government agencies to obtain information about individuals spending high amounts but not filing ITR or underreporting their income. Sample Text Below:
High-value transactions are transactions which involve large amount of money and are reported to the Income Tax Department by banks and other institutions if the transactions cross a certain threshold.
High-value transactions are closely monitored by the Income Tax department through the concept of a statement of financial transaction (SFT) in Form 61A or a reportable account in Form 61B, submitted by specific entities. These entities are mandated to provide information about particular high-value transactions which they have registered, recorded, or maintained during the fiscal year. This enables the Income Tax Department to track an individual's financial activities and ensure tax compliance.
Here is a list of transactions that may trigger a notice from the Income Tax Department, as this data is collected from the respective reporting authorities:
Sr. No. | Transaction | Threshold (Rs) | Which authority should report? |
1 | Cash payment for purchasing bank draft, pay order, banker's cheque or prepaid RBI instruments | 10,00,000 | Banks or co-operative society need to disclose a transaction if the amount deposited exceeds the threshold to the Director of Income Tax by filing Form 61A |
2 | Cash deposits in a savings bank account | 10,00,000 | - Banks - Co-operative society - Post master general |
3 | Cash deposit or withdrawal from a current account | 50,00,000 | Banks or co-operative society |
4 | Sale or purchase of an immovable property | 30,00,000 | The Property Registrar/Sub-registrar must report a transaction exceeding the threshold via Form 61A. |
5 | Investments in shares, mutual funds, debentures and bonds in cash (If amount is transferred from one scheme to another, then reporting is not required) | 10,00,000 | - Company issuing Shares, Debentures, Bonds - Mutual Fund Trustee |
6 | Payment of credit card bill in cash | 1,00,000 | Banks or co-operative society |
7 | Payment of credit card bill other than through cash | 10,00,000 | Banks or co-operative society |
8 | - Sale of foreign currency - Crediting FOREX card - Spending in foreign currency through a debit or a credit card or through traveler's cheque or any other instrument | 10,00,000 | Authorised Person under Foreign Exchange Management Act, 1999 |
9 | Cash deposits in the fixed deposit or recurring deposit account | 10,00,000 | - Bank - Co-operative society - Nidhi Company - NBFC |
Below are some of the measures taken by the department to trace high-value transactions:
Firstly a taxpayer must verify that the SFT transactions reported in the Form 26AS are correct. Subsequently, a taxpayer must ensure to report the said high-value transaction while filing the ITR, and that the tax liability on the same has been accurately calculated. Any error or mismatch in reporting such transactions may trigger an income tax notice.
The income tax department has launched an e-campaign for the voluntary compliance of income tax for the convenience of taxpayers.
The campaign focuses on the assessees/taxpayers who are either:-
Under e-campaign, the income tax department sends emails/SMS to identified taxpayers to verify their financial transactions related to information received by the IT department from various sources such as SFT, TDS, TCS, etc. The department can collect information related to GST, imports/exports, and transactions in securities, derivatives, commodities and mutual funds through various third parties.
You may receive an email/SMS from the e-campaign when:
If you have received an email or SMS for high-value transactions or non-filing of returns, you can respond to the income tax department by following the below steps:
Step 1: Log in to your income tax e-filing account.
Step 2: In the home page, go to ‘Pending Actions’> Compliance Portal > ‘e-Campaign (AY 2021-22 Onwards)’.
Step 3: Select the relevant e-campaign.
After redirecting from the e-filing portal, the landing page of the e-campaign view will be displayed. Select the relevant e-campaign and click on ‘provide feedback in AIS’.
If you don’t have active e-campaigns or e-verifications, you will get the message – “No Compliance Record has been generated for you”.
For example, in the case of high-value transactions or non-filing of income tax returns, it will show the below information under the ‘e-Campaign’ list.
Step 4: Select the information category
‘e’ would be marked against the information category for which you have received the communication.
Step 5: Select the Transaction
The information on which feedback is required would be marked as ‘Expected’.
Step 6: Submit Response
From the options, select the most appropriate response:
- Information is correct
- Information is not fully correct
- Income is not taxable
- Information relates to other PAN/year
- Information is duplicate/included in other displayed information
- Information is denied
Following are the categories where the response is expected from the taxpayer under e-campaign:
Under the ‘Preliminary Response’ section, the taxpayer is expected to respond to relevant questions. The queries under the Preliminary Response section are based on campaign type (non-filing of return/certain high-value transactions done by the taxpayer).
For example, for campaign type – ‘Non-Filing of Income Tax Return’, the taxpayer is expected to submit a response whether an income tax return has been filed or not.
Step 1: Click on the ‘Provide Response’ button provided against the ‘Preliminary Response’ section.
Step 2: On the next page, respond by selecting the relevant drop-down.
Step 3: Provide additional details as required by the income tax department. For example, For the question ‘Whether Income Tax Return (ITR) has been filed?’ the following additional details are required:
Step 4: After filling in all the relevant information, submit the response. You can download the preliminary response submitted from the ‘Activity History’ screen.
If you don’t have active e-campaigns or e-verifications, you will get the message – No Compliance Record has been generated for you.