Income tax keeps an eye on every kind of income of ours. If we make some mistake in ITR, then we can get an income tax notice. What should be done and what should not be done to avoid all this, let us know from Vivek Jalan of Partner Tax Connect Advisory Services LLP.
According to the data of the financial year 2023-24, 6.68 percent of the people of India had paid income tax. This number is very low. A large population stays away from income tax. Those who do not pay income tax feel that we have escaped from it. But they forget that the government has a keen eye on every income of ours. Income tax keeps a keen eye on our every transaction. And on the basis of this data, it can investigate against you and if found guilty, you may also have to pay a hefty fine. To prevent this from happening, it is necessary for you to pay income tax. Now a question must have arisen in your mind that how does the Income Tax Department track our income? To know this question, Jagran’s business team reached out to Vivek Jalan of Partner Tax Connect Advisory Services LLP. He told us the step by step process of how the Income Tax Department tracks our income.
Bank gives information to Income Tax Department
Vivek Jalan told that the main source of information about your financial transactions is the bank. Through banks, the Income Tax Department keeps a close watch on your income and your expenses. It is mandatory for all banks to give information about some important and special transactions to the Income Tax Department. Like-
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- If you deposit more than Rs 10 lakh cash in your savings account, then the bank gives its information to the Income Tax.
- If you deposit or withdraw more than Rs 50 lakh cash from the current account, the bank gives its information to the Income Tax.
- If you make an FD or RD of more than Rs 10 lakh by paying cash, then the bank gives its information to the Income Tax Department.
Do you have to give information on purchasing goods worth more than Rs 2 lakh by paying cash?
Vivek Jalan told that a person who comes under the purview of tax and gives or takes more than Rs 2 lakh in cash as payment for the sale of any kind of goods or services, then he has to give information about it to the Income Tax Department.
Vivek Jalan further told- After getting all this information, the Income Tax Department checks whether the transaction done by you is in accordance with your income or not. If some manipulation is found in it, then the Income Tax sends a notice to the concerned person or institution and asks for a reply.
To understand this by example, suppose if a person withdraws more than Rs 1 crore from his current account, but his business is running in loss and he is not paying tax as per the rules, then he can be sent a notice under Computer Assisted Scrutiny Selection (CASS).
How to avoid filing ITR fraudulently and income tax notice?
Vivek Jalan also told about the way to fill ITR correctly and avoid income tax notice. He told that the Annual Information Statement contains information about every financial activity of yours such as big transactions, property purchases and investments. If the information given in your filled ITR does not match with the AIS, then the Income Tax can take action against you. The Income Tax Department can impose penalty, interest on outstanding tax and can conduct a legal investigation against you.
There are some simple rules to fill it correctly-
- Before filling ITR, check AIS and Form 23AS properly. Match both. If there is any difference between the two, then correct it.
- Disclose all your income sources. Do disclose such income sources which are not shown in Form 26AS. Many taxpayers show only TDS income and do not give information about the income earned from other places.
- Keep your bank statements, rent receipts, lease agreements, investment records, and loan papers all safe and ready in the right manner. You may have to show them when needed.
By following these simple rules, you can keep your ITR accurate and avoid income tax scrutiny.
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