The Income Tax Department is Watching Your High-Value Transactions!

If you're someone who spends a lot but perhaps doesn't always show all your income, the Income Tax Department (ITD) has a new message for you: they're watching. Using modern data analysis and working closely with various government agencies, they're now much better at spotting those who might be hiding or underreporting their income. This means your financial moves are under a bigger scanner than ever before. 

What's the Latest Update? 

The Central Board of Direct Taxes (CBDT) has told "Self-Reporting Organizations" (SROs) to share detailed information about high-value transactions by May 31 of FY26. This includes your banks, post offices, cooperative societies, newer fintech companies, and even mutual fund houses. So, institutions are now legally bound to provide a clear picture of how you're spending and investing. 

What Counts as a "High-Value Transaction"? 

Here's a simplified list of some key transactions the ITD is keeping tabs on: 

• Cash for Bank Drafts, Pay Orders, etc.: If you pay cash for these instruments totaling ₹10 lakh or more. 

• Cash in Savings Account: Cash deposits of ₹10 lakh or more in a savings bank account. 

• Cash in Current Account (Deposit or Withdrawal): Cash deposits or withdrawals of ₹50 lakh or more in a current account. 

• Property Deals: Buying or selling immovable property worth ₹30 lakh or more. 

• Cash in Investments: Cash investments of ₹10 lakh or more in shares, mutual funds, debentures, or bonds. (Note: Transferring money between schemes of the same mutual fund doesn't count). 

• Credit Card Payments (Cash): Cash payments of ₹1 lakh or more towards credit card bills. 

• Credit Card Payments (Non-Cash): Non-cash payments of ₹10 lakh or more towards credit card bills. 

• Foreign Exchange: Foreign currency transactions (like forex cards, debit/credit cards used abroad, or traveler's cheques) amounting to ₹10 lakh or more. 

• Cash in Fixed or Recurring Deposits: Cash deposits of ₹10 lakh or more in Fixed Deposits (FDs) or Recurring Deposits (RDs). 

How is the Income Tax Department Catching On? 

The ITD isn't just relying on reports; they've also improved their own tools: 

• Better Forms: Your Form 26AS, which shows your tax credits, now also includes 'Specified Financial Transactions' (SFT) details. Plus, the new 'Annual Information Statement' (AIS) gives you an even more comprehensive view of all your financial information, which you can check online. 

• TDS on Big Cash Withdrawals: If you withdraw more than ₹1 crore in cash, a 2% TDS (Tax Deducted at Source) will be applied. For those who haven't filed their Income Tax Returns (ITR) for the last three years, the rules are even stricter: 2% TDS on withdrawals above ₹20 lakh, and 5% if you withdraw over ₹1 crore. 

• Mandatory ITR Filing for High Spenders: Even if your income is below the taxable limit of ₹2.5 lakh, filing an ITR became mandatory from April 2019 if you've done certain high-value transactions. This includes depositing over ₹1 crore in a current bank account, spending more than ₹2 lakh on foreign travel, or paying an electricity bill exceeding ₹1 lakh. 

Read more: ITR Filing 2025: Your Simple Guide to Responding to Income Tax Notices 

Conclusion 

These new updates and enhanced tracking mechanisms by the Income Tax Department clearly show a strong push towards greater financial transparency. It's a reminder that all your major financial activities are now more visible to the authorities. Understanding these limits and ensuring you report your income accurately is crucial to avoid any future notices or issues with the tax department. The era of hidden income is becoming increasingly difficult to navigate. 
 
Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions. 

Investments in the securities market are subject to market risks. Read all the related documents carefully before investing.