India’s Income Tax Department is tightening its surveillance on high-value transactions to ensure compliance and prevent tax evasion. With increasing digital footprints and data sharing agreements, authorities now track many big-ticket spends and investments in real time. If your spending habits don’t align with your reported income, you could receive a notice.
Financial institutions and market intermediaries are required to file a Statement of Financial Transactions (SFT) under section 285BA of the Income Tax Act. This report captures high-value transactions and is filed electronically to the tax department. Banks, depositories, mutual funds, registrars and authorized dealers report these activities, and the information is automatically pulled into your Annual Information Statement (AIS). Rule 114E of the Income Tax Rules prescribes the thresholds and formats, while section 271FA empowers the department to levy penalties if statements are not filed or contain errors.
High-value transactions currently under scrutiny include:
• Cash deposits above ₹10 lakh in a savings account in a financial year and ₹50 lakh or more in a current account.
• Cash payments of ₹1 lakh or more against a credit card bill and total credit card payments of ₹10 lakh or more in any mode.
• Purchase of shares, mutual funds, bonds or debentures amounting to ₹10 lakh or more.
• Purchase or sale of immovable property of ₹30 lakh or more, or payment of ₹10 lakh or more in cash for property transactions.
• Time deposits with banks, non‑banking finance companies and post offices aggregating ₹10 lakh or more.
• Purchase of foreign currency or foreign travel packages exceeding ₹2 lakh, and investments in foreign currency above ₹10 lakh in a year.
These transactions are automatically reported by banks, registrars or exchange depositories and cross‑checked with your income tax return.
To avoid mismatches and unnecessary notices, taxpayers should stay informed. Always review your AIS before filing your return and ensure that all income streams, including interest and capital gains, are correctly declared. Reconcile high credit card spends with your reported income and avoid large cash transactions where possible. Keeping digital records and paying through traceable channels helps support your case in case of an inquiry.
Non‑compliance can attract stiff pe
nalties. The Income Tax Department may issue a notice if it detects discrepancies or unreported transactions. Penalties under section 271FA for failing to furnish or furnishing incorrect SFT can range from ₹500 to ₹1,000 per day. Rather than reacting to a notice, proactive reporting and transparency are the best ways to stay on the right side of the law. By understanding which transactions are under the department’s scanner and aligning your financial reporting accordingly, you can ensure a smoother tax filing experience and peace of mind.
