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Section I: Income Tax and You
  • Ques: You must report high value financial transactions in your return
  • Ans: Key points:
    • If you make some high value transactions, such as investment in property and mutual funds, then these transactions are automatically reported to the income tax department by banks and other authorities through Annual Information Return (AIR).
    • The income tax department keeps track of your AIR transactions through your permanent account number (PAN).
    • Similarly, if you spend large amounts then these expenses are also needed to be reported in your Income Tax Return form. You should disclose all information relating to your income/expense because income tax department is already aware of all such transactions which are being reported through AIR by financial institutions, banks, mutual funds etc.
    • The following AIR transactions need to be reported on your return:
      • Cash deposits (Rs. 10 lakh and above)
      • Credit card bills (Rs. 2 lakh and above)
      • Mutual Fund purchase (Rs. 2 lakh and above)
      • Purchase of bonds/debentures (Rs. 5 lakh and above)
      • Purchase of shares of a company (Rs. 1 lakh and above)
      • Purchase of immovable property (Rs. 30 lakh and above)
      • Sale of immovable property (Rs. 30 lakh and above)
      • Purchase of RBI bonds (Rs. 5 lakh and above)
    • To be prepared for scrutiny, you should keep all bank statements and sale/purchase records. It has been observed that the chances of scrutiny increase if AIR transactions are there on the return.
    • Source of income has to be known clearly to show to income tax authorities. So, you should keep your cash flow chart (inflow/outflow) ready.
 
     
 
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