In today’s digital world, the way we manage our money has transformed dramatically, and so has the vigilance of the Income Tax Department. Whether you are making hefty online transfers or conducting high-value cash transactions, the tax authorities are closely monitoring every move linked to your finances. If you believe your financial activities will go unnoticed unless you personally disclose them, think again — you might be heading towards an unexpected income tax notice.

Let’s take a closer look at five major financial transactions that are under the scanner of the Income Tax Department. Ignoring these could easily land you in trouble, so staying informed and careful is crucial.

How the Income Tax Department Tracks Your Transactions

The Income Tax Department collects detailed information about certain Specified Financial Transactions (SFTs) directly from banks, financial institutions, and other entities linked to your PAN. This data is captured in your Annual Information Statement (AIS). If discrepancies arise between your tax filings and these records, you might be asked to explain the source of your funds.

Here are the key transactions you must be cautious about:

1. Large Cash Deposits and Withdrawals in Savings Accounts

If the total cash deposits or withdrawals in your savings account cross ₹10 lakh in a financial year, your bank is mandated to report it to the Income Tax Department. For current accounts, the reporting threshold is even higher — ₹50 lakh or more. Should your cash dealings surpass these limits, be prepared to justify the origin of the funds.

2. Significant Investments in Fixed Deposits (FDs)

Depositing ₹10 lakh or more into fixed deposits across one or multiple accounts within a financial year also gets flagged. Whether these deposits are made in cash or through online modes, the reporting bank or financial institution will inform the tax authorities. If asked, you must be able to provide a valid explanation regarding the funds used for such investments.

3. High-Value Investments in Stocks, Mutual Funds, Bonds, or Debentures

Investments totaling ₹10 lakh or more in equities, mutual funds, bonds, or debentures within a year are monitored too. Depositories like NSDL, CDSL, and registrars report such transactions to the Income Tax Department. If you’re making big moves in the stock market or mutual funds, ensure your investment sources are clean and well-documented.

4. Large Credit Card Bill Payments

Payments towards credit card bills are another area under tight scrutiny. If you make a cash payment exceeding ₹1 lakh in a financial year or if your total payments (via any method) cross ₹10 lakh, your credit card company will report it to the tax authorities. Cash payments, in particular, attract closer inspection, so always maintain a record of the payment sources.

5. Buying or Selling Expensive Property

Purchasing or selling immovable property worth ₹30 lakh or more automatically alerts the Income Tax Department. When such a transaction is registered, details are forwarded to the authorities irrespective of how much was paid in cash or through banks. You must be ready to provide documentary proof for the source of funds used in buying or selling real estate assets.

Getting a Tax Notice Is Not Always Bad

Receiving an income tax notice doesn’t necessarily mean you have committed any fraud or wrongdoing. Often, it simply means that the department requires clarification regarding certain large transactions linked to your PAN. If you maintain proper financial records and file accurate income details, resolving such queries becomes straightforward and stress-free.

To stay on the safe side:

• Always document your big transactions carefully.

• Report all sources of income correctly.

• Avoid large cash transactions whenever possible.

By staying transparent and vigilant about your finances, you can avoid unnecessary hassles and ensure smooth interactions with the Income Tax Department.