The #IncomeTaxDepartment gets information about particular transactions through its sources. Based on such information, they match it with the information provided in the #IncomeTaxReturns by the taxpayer. The third-party information helps the department to find out the taxpayer who is looking to escape the tax liability or reporting requirements.

To widen the tax net, the IT department has employed the assistance of analytics to scrutinize the data to identify people who haven’t filed income tax returns or have underreported income despite performing a high value transaction.

The tax department gets information from reports of tax deducted at source and tax collected at source. The tax deducted at source (TDS) on income or payment obtained by the taxpayer is reported to the department of income tax. When tax is deducted at source on those payments, it is imperative that it is reported to the department of income tax through TDS returns. Such return has the deductees’ PAN number and transaction details.

Likewise, when a seller collects tax at source on goods like motor vehicle, scrap etc., the seller files the Tax collected at source return, reflecting in the 26 AS of the buyer. Therefore in case of a mismatch in your income details provided in the income tax return and 26 AS Form may invite notice from the income tax department.

Statement of financial transactions refers to a report filed by specified persons under section 285 BA. It contains transactions exceeding the threshold limit, including expenditures and investments done by taxpayers in a financial year. Specified entities such as banks, mutual funds, bonds issuing institutions and registrars or sub-registrars should file Statement of financial transactions. The limit of different financial transactions in a financial year that should be reported under the Statement of financial transactions shall include
• Cash deposit in the savings account of 10 lakh rupees or more;
• Cash deposit or withdrawal aggregating 50 lakh rupees or more in the current account in a year;
• One or more time deposits aggregating 10 lakh rupees or more;
• Mutual funds units acquired for more than 2 lakh rupees in a year;
• Investments in bonds or debentures for 10 lakh rupees or more in a year;
• Payments by credit card that aggregate 1lakh rupees or more in cash/10 lakh rupees or more in any other mode;
• Sale or purchase of immoveable property for 10 lakh rupees or 30 lakh rupees (stamp duty value) or more;
• Equity shares acquired for 10 lakh rupees or more of a company;
• Cash payment of 2 lakh rupees or more for goods or services sale to the person who is liable for tax audit according to the income tax act.
• So there are a few things that you can do to avoid getting notices from the income tax department.
• Firstly file your income tax return before the due date;
• Cross check all the TDS entries in Form 26 AS. You can repeat this once in a quarter;
• Check Form 26 AS if any transactions are reported under the AIR section;
• Disclose your entire and correct income earned during the financial year in your ITR;
• Keep a record of all your high value transactions, investments and expenses.

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