High Value Transactions

High-value transactions in income tax typically refer to financial transactions or activities that involve significant amounts of money. These transactions are usually subject to closer scrutiny by tax authorities due to their potential impact on tax liabilities. These transactions are often targeted by money launderers and terrorist financiers, which is why compliance with high-value transaction regulations is crucial.

High value transactions are basically those transactions which exceeds a particular threshold limit decided by a particular regulatory authority. Generally these authorities report such transactions to Income Tax Authorities in order to provide transparency and regulatory compliance in the economic and financial sector of the society.

One may wonder how does income tax department able to keep a watch over your financial transactions when you have not reported them yourselves. Various government agenices, Banks or different statutory authorities have a compiled information of all your financial transactions which is reported to Income Tax Department upon crossing a particular threshold limit.

Reporting of High Value Transactions:
Income Tax Department keeps a close eye on certain transactions which exceed a specified threshold limit. To tackle these reporting compliances Income Tax Department has come up with the concept of SFT (Statement of Financial Transactions) in form 61A and Reportable account in Form 61B, submitted by specific entities.

IT Department has taken following steps to report these high value transactions to taxpayers:

26AS shows Specified Financial Transaction (SFT) in AIS of the taxpayer. These transactions are reported in 26AS as well as in AIS.

TDS requirements
To track these High value transactions, government has proposed to deduct TDS @ 2%

  • On cash withdrawals more than Rs.1Cr. during a financial year
  • If ITR for three year preceeding previous years are not filed and cash withdrawals are more than Rs.20Lakhs

For cash withdrawals exceeding Rs.1 crore TDS @5% shall be deducted.

ITR Filing requirement
ITR Filing has been made mandatory even if the income is less than basic exemption limit but the person has entered into certain specified high-value transactions.

Following are High Value transactions that various agencies, banks or government authorities report to tax authorities:

  • Cash deposits or withdrawals exceeding Rs. 10 lakh from a savings bank account within a fiscal year.
  • Cash deposits or withdrawals surpassing Rs. 50 lakh from a current account within a fiscal year.
  • Over 10 lakh in cash is deposited into a fixed deposit account in a fiscal year.
  • Sales or purchases of the immovable property exceeds 30 lakh rupees in a financial year.
  • Cash investments exceeding 10 lakh rupees in a financial year in stocks, mutual funds, debentures, and bonds.
  • Exceeding Rs. 1 lakh in cash payments for credit card bills in a fiscal year.
  • Exceeding 10 lakh in a fiscal year in payments made for credit card debt using any method other than cash.
  • Sale of foreign currency of more than 10 lakh rupees in a fiscal year.
  • High-value transactions such as domestic business-class air travel, tuition or donations payments, and purchases of jewelry, white goods, paintings, marble, and electricity consumption exceeding Rs. 1 lakh in a fiscal year may prompt the Income Tax Department to issue a notice.

Responses to High Value Transactions are to be submitted through compliance portal of income tax. You will see the list of transactions where responses are expected to be submitted for further processing. You will get the following options to submit the response:

  • Information is correct
  • Information is not fully correct
  • Income is not taxable
  • Information relates to other PAN/year
  • Information is duplicate/included in other displayed information
  • Information is denied

Reporting of appropriate feedback and responses of SFT High value transactions is important. If you get any alerts of High value transactions then it is expected of you to identify such transactions, submit responses or identify if any errors are present. The Income Tax Department monitors high-value transactions to prevent tax evasion and black money generation. Taxpayers need to comply with income tax on high-value transactions to avoid any legal consequences.

About Author:
CA Chinmay Shirish Agate
Chinmay Agate is a Practicing Chartered Accountant having 4+ years of experience and expertise in the field of Direct Taxation and Auditing compliances. In the past, he worked in various CA firms and comes with wide industry experience from services, retail to manufacturing to trading where he has handled various complex assignments. He has keen interest in Forex and Derivative knowledge as well as fundamental analysis.

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