What are High-Value Transactions?
High-value transactions involve large sums of money and are reported to tax authorities by banks and other institutions when they surpass predefined thresholds, ensuring transparency and regulatory compliance within the financial system.
Here are some examples of Income Tax high-value transactions:
Below is a list of transactions that are reported to the Income Tax Department by various agencies such as banks, government agencies, mutual fund houses, and companies by filing Form 61A, also known as Statement of Financial Transactions (SFT).
As per the Income Tax department, the following will be considered high-value transactions if they exceed the following limits:
- Exceeding Rs. 10 lakh in cash deposits or withdrawals from a savings bank account in a fiscal year.
- Exceeding Rs. 50 lakh in cash deposits or withdrawals from a current account in a fiscal year.
- Over 10 lakh in cash is deposited into a fixed deposit account in a fiscal year.
- Sales or purchases of the immovable property exceeds 30 lakh rupees in a financial year.
- Investments in cash worth more than 10 lakh rupees in a financial year in stocks, mutual funds, debentures, and bonds.
- Exceeding Rs. 1 lakh in cash payments for credit card bills in a fiscal year.
- Exceeding 10 lakh in a fiscal year in payments made for credit card debt using any method other than cash.
- Sale of foreign currency of more than 10 lakh rupees in a fiscal year.
- Domestic business-class air travel, the payment of tuition or donations, and the purchase of jewelry, white goods, paintings, marble, and electricity consumption exceeding Rs. 1 lakh in a fiscal year are a few examples of high-value transactions for the Income Tax Department may send you the notice.
How do credit card transactions affect your taxes?
There are no specific rules for credit card spending, but banks are required to report high-value transactions to the Income Tax Department. Financial institutions are required to report any transaction above Rs 10 lakh using Form 61A.
When filing your ITR, make sure you accurately report all of your credit card expenses. If you don't, you could encounter penalties and legal consequences , especially if:
- Your credit card payments surpass ₹1 lakh.
- You buy goods or services worth ₹10 lakh or more.
To avoid getting a notice for income tax, follow the following steps:
- Even though credit cards allow you to spend more, make sure not to go over the top and thus get a tax notice.
- Filing your taxes on time is important.
- Accuracy will be achieved as ITR revenue will be linked with the Form 26AS; credit card purchases under ₹2 lakh shall be restricted for the fiscal year.
- Declare all the big transactions in your ITR.
Steps taken by IT Department to Trace High-Value Transactions
Have you ever wondered how the tax department keeps track of your high-value transactions? Well, they have access to your financial data they collect from different govt. Agencies and banks. Here are a few ways they can monitor your transactions and detect any tax evasion or avoidance.
- The tax department requires banks and other financial institutions to submit an Annual Information Return (AIR) every year that contains details about transactions that exceed a permissible threshold. For instance, if you deposit more than Rs. 10 lakh in cash in a single calendar year, invest more than Rs. 2 lakh in mutual funds, or spend more than Rs. 30 lakh on real estate, the AIR will be updated.
- Statement of Financial Transactions (SFT) Compared to the previous report, it includes a wider range of transactions, such as credit card payments, foreign exchange transactions, stock and bond purchases, insurance policy purchases, and gold and silver purchases. Different reporting thresholds depend on the transaction type, but transactions between 50,000 and 10 Lakh come under these thresholds.
- Tax Deducted at Source (TDS): When the payer withholds a portion of the tax from the payment made to the payee and deposits it with the income tax department on the payee's behalf. For instance, if a company credits your salary, it will deduct tax from it and pay it to the tax authority. Your Form 26AS, a summary of all your tax credits, includes information about the TDS.
- Like TDS, Tax Collected at Source (TCS) is when sellers of goods or services collect tax from the customers and deposit it with the income tax department. For instance, if you purchase a car that costs more than 10 lakh, the seller will charge you 1% tax and submit it to the tax department. Your Form 26AS also includes the TCS information.
- You must file an income tax return (ITR) each year to report your income, deductions, paid taxes, and claimed refunds. The tax department can verify your sources of income and spending habits by comparing the data on your ITR with the data they have from AIR, SFT, TDS, and TCS.
How Can You Submit Responses in the Compliance Portal?
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. The user-friendly platform is designed to make your life easier by allowing you to provide high-value transaction notice reply without ever having to step foot in the Income Tax Department's office. But how exactly do you use the portal to submit high-value transactions notice reply? Here's a step-by-step guide:
Step 1: Income Tax Compliance Portal Login
Taxpayers can log in to the Income Tax Compliance portal using their PAN number and password. If the taxpayer does not have a password, they can generate it by clicking on the 'forgot password' option.
Step 2: View the High-Value Transaction
After logging in, taxpayers can view the high-value transaction reported by the Income Tax Department by clicking on Pending actions, then on the Compliance portal, and then on E Campaign.
Step 3: Select the relevant e-campaign
After reaching the landing page of the e-campaign portal, you can 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.”
Step 4: Select information Category
An “E” mark can be seen against the information category for which you have received the communication. E means expected.
Step 5: Submit the 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
The response will be sent to the Income Tax Department for further processing.
Have you also received an Income Tax notice or an email/sms from ITD and want to know details on high value transactions notice reply, consult the best tax experts and get strategically tailored guidance as per your specific needs.Hire Online CA.
Preliminary Response
If you receive an Income Tax e-Campaign notice, there will be a "Preliminary Response" section where you need to answer questions. These questions depend on the campaign type, like whether you filed an ITR or made certain high-value transactions.
For example, if the campaign is about non-filing of ITRs:
- Click "Provide Response" in the "Preliminary Response" section.
- Choose your answer via the drop-down menu.
- Provide additional details depending on your answer:
- Filed ITR: Enter the acknowledgment number, date, filing mode (e-filed or paper), circle/ward/city, and optional remarks.
- Didn't file ITR: Select the reason and add any comments.
- Complete all information and submit your response. You can download it later from the "Activity History" tab.
Note: You won't see this section if you don't have any active e-campaigns or e-verifications.
Please provide feedback on the information within the e-campaign where no feedback has been previously given. Specifically, focus on the L1 information, which is designated as 'Expected,' as indicated in the attached screenshot.
For guidance on providing feedback, refer to the link: Submit feedback on information in AIS.
This process enables you to submit a response to the income tax department regarding the notice on high-value transactions or non-filing of the income tax return.
Why is it important to submit responses in the compliance portal?
The Income Tax Department monitors high-value transactions to prevent tax evasion and black money generation. Taxpayers need to comply with income tax on high-value transactions to avoid any legal consequences. The Income Tax Compliance portal is a user-friendly platform that allows taxpayers to submit their responses online without the need to visit the Income Tax Department's office. By following the step-by-step guide mentioned above, taxpayers can submit their responses in the compliance portal hassle-free and timely. It is important to note that submitting responses in the Income Tax Compliance portal is a legal obligation and a responsible citizenship duty.
Taxpayers contribute to the country's economic growth and development by complying with high-value transactions in income tax.
Therefore, taxpayers must keep track of their financial transactions and submit responses in the compliance portal as and when required. If you find responding to notices complicated, you can talk to our experts, who can guide you through the process and make sure that you file the correct response.
On the Income Tax Compliance Portal, you can also view your Annual Information Statement, e-Campaigns, e-Proceedings, and DIN Authentication.
Here's what you should do if you see SFT (Specified Financial Transactions) reflected in your Form 26AS:
-
Step 1: Verify the information:
Match the details: Carefully compare the transactions mentioned in Form 26AS with your records. Ensure the type of transaction, amount, and date match your recollection.
Identify errors: If there are any discrepancies, like an unknown transaction or incorrect amount, investigate the source. Contact the relevant institution (bank, broker, etc.) to clarify the issue.
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Step 2: Reporting and taxes:
Include in ITR: Ensure you report all the SFT transactions reflected in Form 26AS while filing your Income Tax Return (ITR). Choose the appropriate schedule based on the transaction type (e.g., Schedule D for capital gains).
Tax liability: Calculate the tax liability accurately for each transaction based on applicable tax rates and deductions.
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Step 3: Potential discrepancies:
Missing transactions: If any legitimate SFT transactions are missing from Form 26AS, you need to disclose them in your ITR and explain the reason for non-reporting in the specified column.
Overlooked income: Ensure all income generated from these transactions is reported, even if it's exempt from tax. Failing to do so might lead to scrutiny from the Income Tax Department.
Who can Receive Email/SMS From the Income Tax Department?
Under the e-campaign initiative, the Income Tax department communicates via emails or SMS to specific taxpayers to validate their financial transactions, sourced from diverse channels like SFT, TDS, TCS, and other avenues. Information encompassing GST, imports/exports, and dealings in securities, derivatives, commodities, and mutual funds can be gathered from third-party sources.
If the income tax department identifies that certain information related to your high-value transaction, which does not appear to be in line with the income tax return filed by you for AY 2023-24, you can receive an email or sms.
You might receive an email/SMS from the e-campaign if:
- Non-filing of Income Tax Return
- Discrepancies/deficiencies in your Income Tax Returns
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E-Campaign for Voluntary Compliance
The Income Tax Department has initiated an e-campaign, sending messages and emails to select taxpayers who have either missed filing their Income Tax Returns or failed to report high-value transactions. The primary goal of this campaign is to encourage voluntary compliance, helping taxpayers avoid notices and scrutiny.
These e-campaign alerts or High-Value Transaction (SFT) notices typically arrive several months after the original transaction date. Your response will depend on whether revisions are still possible. If within the time limit, promptly file your belated or revised return, ensuring all transactions reported by the department are included, and settle any outstanding taxes.
If you have also received an email/SMS from the income tax department for high-value transactions, you can consult our tax experts to get accurate guidance on how to respond to such notices.
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