The Income Tax Department does not monitor only your salary or business income. It also keeps a close watch on certain high-value financial transactions carried out through banks and financial institutions.
Banks, mutual fund houses, registrars, and other entities regularly share transaction data with the tax department. The main objective is to curb tax evasion, control black money, and verify whether large expenses are backed by legitimate income sources. This system helps the department differentiate between genuine taxpayers and suspicious financial activity.
Below are some common high-value transactions that can attract attention from the Income Tax Department.
Large Cash Deposits in Savings Accounts
If the total cash deposited in your savings account exceeds ₹10 lakh in a financial year, the bank automatically reports it to the Income Tax Department.
This does not mean the transaction is illegal. However, the department may seek clarification on the source of the cash. You may be asked whether it came from salary, business income, sale of property, gifts, or any other legitimate source.
If the explanation does not match your income tax return, it may trigger a notice.
High-Value Cash Investments in Fixed Deposits
Investing ₹10 lakh or more in fixed deposits using cash is also classified as a high-value transaction.
Such transactions are reported so the department can verify whether your declared income supports such investments. If there is a mismatch between your ITR and the amount invested, further scrutiny may follow.
Large Credit Card Bill Payments
Credit card usage is another area under monitoring.
If you pay more than ₹1 lakh in cash or over ₹10 lakh through banking channels towards credit card bills in a year, it becomes a reportable transaction.
The tax department uses this data to assess whether your spending habits align with your declared income. Excessive spending compared to reported income may raise red flags.
High-Value Transactions in Shares, Mutual Funds, and Bonds
Buying or selling shares, mutual funds, or bonds worth more than ₹10 lakh in a financial year is tracked by the Income Tax Department.
This helps in cross-verifying capital gains, losses, and tax payments. Investors who earn significant profits but underreport or skip reporting them in their ITR are more likely to face scrutiny.
Property Purchases and Cash Transactions
Real estate transactions above ₹30 lakh are automatically recorded in the tax system.
The risk increases if a part of the transaction involves cash. The department examines whether the declared property value matches market value and whether the payment method indicates undisclosed income.
Jewellery Purchases, Foreign Travel, and Bank Lockers
PAN details are mandatory for jewellery purchases exceeding ₹2 lakh. This data is shared with the tax department to prevent unaccounted money from being invested in gold or silver.
High spending on foreign travel packages and the contents of bank lockers may also be reviewed if they appear disproportionate to declared income.
Large Digital Payments and How to Stay Safe
Large UPI and digital transactions, especially by business owners, are closely analysed to match actual turnover with reported income.
To avoid income tax notices:
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Always maintain proper documentation for large transactions
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Declare correct income in your ITR
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Avoid unnecessary cash dealings
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Ensure PAN and Aadhaar-linked accounts reflect accurate financial activity
Transparent reporting and clean records are the best ways to stay compliant and stress-free.
