Learn why large cash deposits and high-value transactions trigger Income Tax Department scrutiny. Discover SFT limits, penalties, documents required, and how to stay compliant.
🔍 Introduction: Why Is the Taxman Watching Your Bank Account?
If you’ve ever deposited a large sum into your bank account and wondered, “Will the Income Tax Department notice?” — the answer is yes. With increasing financial transparency and digital tracking, the ITD monitors high-value bank transactions to catch tax evasion, detect black money, and ensure proper tax compliance.
In this guide, we’ll break down:
What type of transactions are tracked under SFT (Statement of Financial Transactions)
How to avoid penalties
What to do if you get an Income Tax Notice
Q1: Why does the Income Tax Department monitor large transactions?
The Income Tax Department tracks large bank transactions to:
Identify unreported income
Prevent money laundering
Enforce tax laws
🔎 Real Example:
Ramesh earns ₹8 lakh per year but deposits ₹15 lakh cash into his savings account. The ITD may ask:
“Where did this extra money come from?”
💡 Key Insight: Even if your source is legal, if it’s not declared, you could face scrutiny.
Q2: What type of transactions are monitored and what are the limits?
Under SFT reporting, banks, credit card companies, and registrars must report transactions above certain thresholds:
💼 Transaction Type 🚨 Trigger Limit
Cash deposit in savings accounts ₹10 lakh+ in one financial year
Cash deposits in Fixed Deposits (FDs) ₹10 lakh+ per year
Single cash deposit (PAN mandatory) ₹50,000+
Credit card bill (cash payment) ₹1 lakh+ per month
Credit card bill (annual non-cash total) ₹10 lakh+
Purchase/sale of property ₹30 lakh+
Business cash deposits (Current Account) ₹50 lakh+ annually
Foreign travel expenses ₹2 lakh+ annually
Investments in shares, MFs, bonds (cash) ₹10 lakh+ annually
Annual electricity bill ₹1 lakh+
🔎 Real Example:
If Priya buys a house worth ₹40 lakh and her declared income doesn’t support it, she’ll likely receive an Income Tax Notice.
👉 Read more about how SFT reports are tracked
https://incometaxindia.gov.in/Pages/default.aspx
Q3: What happens if I ignore or mishandle an income tax notice?
Consequences include:
Income treated as unexplained under Section 68
Tax @60% + surcharge + cess (~75%)
Penalty up to 200% of the tax amount
Legal action, including prosecution
🔎 Real Example:
If you can’t explain a ₹12 lakh deposit, ITD may apply Section 68, and you could lose ₹9+ lakh in taxes and penalties.
✅ Pro Tip: Keep complete documentation even for money received as a gift.
Q4: What documents should I keep to explain large bank transactions?
🗂️ Must-have documents:
Bank statements
Gift deed (if money is from family)
Property deeds
Investment proofs
Loan agreements
Salary slips, Form 16, ITR copies
🔎 Real Example:
Received ₹5 lakh from your father? You’ll need a gift deed + his bank statement as proof.
Q5: What if I ignore the notice completely?
You may face:
Penalty: ₹100/day to 200% of tax due
Best judgment assessment (Section 144)
Reassessment (Section 148)
Prosecution in serious cases
Asset attachment or account freezing
🔎 Real Example:
A businessman ignored an SFT-based IT notice. His bank account was frozen. Later, he had to pay ₹17 lakh in tax, interest, and penalty.
💬 Final Thoughts: How to Stay Safe from IT Scrutiny
Here’s your safety checklist: ✅ File accurate ITR matching your bank activities
✅ Maintain a paper trail for gifts, cash deposits, loans
✅ Respond to notices on time
✅ Avoid unexplained cash transactions above ₹50,000
🙋 FAQs
1. What is the cash deposit limit in a savings account before triggering IT scrutiny?
Any deposit over ₹10 lakh per year is reported under SFT.
2. Will I get an Income Tax notice for depositing ₹5 lakh cash?
Possibly not. But repeated or unexplained deposits over time could attract scrutiny.
3. How can I avoid getting penalized under Section 68?
Maintain proof of source — salary slips, loan agreements, gift deeds, etc.
4. Is PAN mandatory for cash deposits above ₹50,000?
Yes, PAN must be quoted for single deposits over ₹50,000.
5. Can a gift from a relative be taxed?
Gifts from relatives (like parents, siblings, spouse) are not taxable, but must be properly documented.
📞 Worried about a notice or planning a large transaction?
Get expert guidance today.
👉 Contact https://wa.me/qr/GEYJOKSR22GFA1
📧 Or email: bpanpaliya@gmail.com
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