Income Tax: Want To Stay Off Tax Department's Radar? These Limits You Should Never Cross

Filing Income Tax Return is mandatory if your income exceeds the basic exemption limit. But even if your income is below the threshold, certain financial transactions can still bring you under the Income Tax Department’s radar.

To avoid scrutiny from the tax authorities, it's important to understand and stay within specific financial limits as any irregularities on certain expenditures, earnings and investments could lead to a notice from the I-T Department. In a recent post on X, chartered accountant and tax expert Nitin Kaushik outlined the instances which may lead to an income tax notice.

It is important to note that the ITR filing season is underway. The last date to file ITR for FY 2024-25 is Sept. 15 for taxpayers whose accounts are not required to be audited.

If your total cash deposits across all savings accounts exceed Rs 10 lakh in a financial year, it is expected to draw the attention of the Income Tax Department. Banks are mandated by the Central Board of Direct Taxes (CBDT) to report such transactions, even if the amount is split across multiple accounts.

Deposits above Rs 10 lakh in fixed deposit accounts across banks will also be reported. Interest earned is taxable and any discrepancy between FD investments and declared income may lead to a scrutiny.

As per CBDT guidelines, if you pay Rs 1 lakh or more in cash, or Rs 10 lakh and any higher amount through other modes, toward your credit card bills in a financial year, the transaction will be reported to the Income Tax Department.

Purchase or sale of property above Rs 30 lakh is closely monitored by the I-T Department. If you have undertaken a transaction of this amount or a higher amount, ensure your source of funds is clearly documented and accurately reported in your ITR.

Investments in mutual funds, stocks, or bonds above Rs 10 lakh are tracked by the tax authorities. Make sure to declare your capital gains, dividend income and the source of funds clearly in your ITR. Transfers from one scheme to another, however, do not require reporting.

Spending more than Rs 2 lakh on overseas travel in a financial year can raise a red flag if it’s not supported by reported income. Such expenses are often matched against your ITR to check for any possible tax evasion.

While there’s no harm in spending or investing your money, it is important to align your financial activity with what you report in your ITR. Transparency, timely filing and proper documentation are your best defences against unwanted scrutiny from the Income Tax Department.