Non-declaration of certain high-value transactions may result in an income tax notice

NON-DECLARATION OF CERTAIN HIGH-VALUE TRANSACTIONS MAY RESULT IN AN INCOME TAX NOTICE

Multiple government entities provide information on high-value transactions conducted by people to the Department of Information Technology. If you do not declare certain transactions in your ITR, the Internal Revenue Service (IRS) may send you a notice requesting an explanation.

Taxpayers must declare some high-value transactions on their income tax return (ITR), or they risk receiving a tax notice from the Internal Revenue Service. It’s worth noting that the Department of Information Technology obtains data on high-value transactions done by individuals from a variety of government entities. If you do not declare certain transactions in your ITR, the Internal Revenue Service (IRS) may send you a notice requesting an explanation.

Here are some of the high-value transactions that you should declare on your ITR:

Cashing in a fixed deposit of more than Rs 10 lakh

If you make a cash fixed deposit of more than Rs 10 lakh, you must disclose it on your ITR. If the value of such individual deposits exceeds Rs 10 lakh, the Central Board of Direct Taxes (CBDT) has directed banks to notify them.

Read More…

[pt_view id=”baa39696xe”]

Making a cash deposit in a savings bank account of more than Rs 10 lakh

The Income Tax Department may issue an income tax notice to a savings account customer who deposits more than Rs 10 lakh in his account during a financial year. As a result, all cash deposits or withdrawals in a bank account that exceed Rs 10 lakh in a financial year must be reported to the IRS. The limit for current accounts is Rs 50 lakh.

Using cash to pay credit card debts

Making a cash payment of Rs 1 lakh or more on a credit card statement should also be disclosed. Additionally, if a payment of Rs 10 lakh or more is made to settle credit card obligations in a financial year, the amount must be mentioned in the ITR.

The purchase or selling of a moveable asset

Property registrars must report to the tax authorities any investment or sale of immovable property of Rs 30 lakh or more. So, if you are buying or selling a property worth more than Rs 30 lakh, you must disclose it to the Income Tax Department.

9 WAYS TO SAVE MONEY ON TAXES WHILE ALSO IMPROVING FINANCIAL HEALTH

Cash transactions involving stocks, mutual funds, debentures, and bonds

If you used cash to invest in mutual funds, equities, bonds, or debentures, make sure the total value of the transaction does not exceed Rs 10 lakh. The Internal Revenue Service (IRS) has developed an Annual Information Return (AIR) account of financial transactions to help taxpayers track high-value transactions. On this basis, tax officials will collect information about unusually high-value transactions in a given fiscal year.

Expenses in foreign exchange/sale of foreign currency

If you received an amount of Rs 10 lakh or more for the sale of foreign currency in a financial year, you must record it in your ITR. Any foreign currency credit made using a debit or credit card, as well as the issuing of traveler’s checks, draughts, or other instruments, shall be reported to the I-T Department.

list of high-value transactions that could result in a tax notice.

List of high-value transactions that could result in a tax notice.

If the value of a transaction exceeds a certain threshold limit, it must always be notified to the Income Tax Department.

If a person engages in high-value cash transactions, he or she is likely to receive a notification from the Internal Revenue Service. If the value of a transaction exceeds a certain threshold limit, it must always be notified to the Income Tax Department. The Internal Revenue Service has reached agreements with a number of government agencies to access financial information of people who engage in high-value transactions but fail to mention them on their tax returns.

Here are some examples of transactions for which you may receive a notification from the IRS:

Depositing large sums of money in bank FDs

The maximum amount of cash that can be deposited in a bank FD is Rs 10 lakh. A bank depositor making a cash deposit in a bank FD account is cautioned not to exceed the Rs 10 lakh limit. The Central Board of Direct Taxes (CBDT) has announced that banks must disclose whether individual deposits in one or more fixed deposits exceed the permissible maximum.

Read More…

[pt_view id=”baa39696xe”]

Savings account deposits

A bank account’s cash deposit limit is Rs ten lakh. The Income Tax Department may issue an income tax notice to a savings account client who deposits more than Rs 10 lakh during a fiscal year.

As a result, all cash deposits or withdrawals in a bank account that exceed Rs 10 lakh in a calendar year must be reported to the tax authorities. The limit is Rs 50 lakh for current accounts.

Paying off credit card debt

Payments of Rs 1 lakh or higher in cash against credit card debts should be disclosed, according to the CBDT. Additionally, if a payment of Rs 10 lakh or more is made to settle credit card obligations in a financial year, the amount must be reported to the tax authorities. The income tax that applies to credit card transactions is, however, the most pressing worry. You must ensure that you do not exceed your credit card spending limit, as the tax authorities maintains track of credit card transactions because your credit card information is connected to your PAN Card, allowing the government to readily monitor your spending online. Any significant transaction should be disclosed when submitting an ITR.

Do you receive dividends on a regular basis? Beware! This year, you must pay tax and report it on your ITR.

The purchase or selling of a moveable asset

Any investment or sale of immovable property of Rs 30 lakh or more must be reported to the tax authorities by the property registrar. Your Form No. 26AS should be used to report the property purchase or sale. If you buy or sell a property for more than Rs 30 lakh, you are also on the radar of the Income Tax Department. The IRS may investigate whether the buyer declared the money on his or her tax return.

Cash transactions involving stocks, mutual funds, debentures, and bonds

Certain investors in mutual funds, equities, bonds, and debentures must limit their cash transactions in these investments to Rs 10 lakh. The Internal Revenue Service (IRS) has developed an Annual Information Return (AIR) account of financial transactions to help taxpayers track high-value transactions. On this basis, tax officials will collect information about unusually high-value transactions in a given fiscal year. Check the AIR section of your Form 26AS if any expense or transaction has been marked as a high-value transaction. The high-value financial transactions are detailed in PART -E of Form 26AS.

Selling foreign cash and incurring foreign exchange costs

Any individual who receives an amount of Rs 10 lakh or more in a financial year for the sale of foreign currency, as well as any credit in that currency, whether through a debit card or credit card, or insurance of a traveller’s cheque, draught, or other instruments, must notify the Income Tax Department.

9 ways to save money on taxes while also improving your financial health

9 WAYS TO SAVE MONEY ON TAXES WHILE ALSO IMPROVING FINANCIAL HEALTH

Here are nine strategies to save money on taxes and enhance your overall financial health.

1.INVESTING IN TAX-AVOIDANCE VEHICLES

The government has offered specific tax deductions on sums invested in designated instruments under section 80C of the Income-tax Act of 1961 to encourage residents to save. The following are some of the most common tax-advantaged specified investment instruments:

  • Provident Fund for Employees (EPF)
  • PPF stands for Public Provident Fund (PPF)
  • Deposits that are fixed (tenure of 5 years or more)
  • Policies for life insurance
  • ELSS mutual funds are a type of mutual fund that invests in
  • Pension systems such as the National Pension Scheme (NPS) and others

Investing correctly in these products can help you reach your financial goals while also saving money on taxes (up to a ceiling of Rs 1.5 lakh per financial year). However, tax savings will only be possible if a person chooses the previous tax system. Many of the tax deductions and exemptions available under the old tax regime, such as the section 80C benefit, will be lost if one chooses the new tax regime, which offers lower tax rates. Those who have chosen the new tax regime should keep in mind that investing in the above products will only help them achieve their financial goals, not save money on taxes.

Read More…

[pt_view id=”baa39696xe”]

2.SELECTION OF RELEVENT COMPONENTS IN THE EMPLOYER’S WAGE STRUCTURE

If you are a salaried employee, you can assess the wage structure supplied by your employer and choose the components of your salary that will help you maximise your tax benefits. For example, if you pay rent, you can get House Rent Allowance (HRA), phone/internet expenditure reimbursements, education allowance, food vouchers, and so on. As a result, when calculating taxable income, suitable deductions/exemptions can be claimed (as per the specified conditions).

3.INCREASED CONTRIBUTIONS TO RETIREMENT FUNDS

If the investment limit of Rs 1.5 lakh is not reached, salaried individuals can consider making additional contributions to the ‘Voluntary Provident Fund’ in addition to EPF. Subject to certain conditions, this additional donation will also be deductible from taxable income. Furthermore, the employer’s payment to NPS (limited to 10% of income) will be deducted from the employee’s pay.

Keep in mind, however, that an employee’s individual contribution to EPF and VPF cannot exceed Rs 2.5 lakh in a financial year; otherwise, income tax will be due on the interest accumulated on the excess provident fund contributions.

4.HOME LOAN TAX ADVANTAGES 

If a housing loan is taken out from a financial institution such as a bank, a non-bank financial company (NBFC), or a housing finance company to purchase or construct a home, the interest and principal paid on the loan can be deducted from taxable income, subject to certain limits set by the tax laws. However, tax savings can only be claimed if the old tax regime is chosen. Keep in mind that the deduction for principal payments is limited to Rs 1.5 lakh altogether under Section 80C.

5.HAVING HEALTH INSURANCE TO PROTECT ONESELF

Deductions for health insurance premiums paid for the self, spouse, dependent children, and dependent parents are allowed under the tax code. As a result, one can purchase health insurance for oneself and family members to help manage medical bills in the event of a medical emergency while also receiving tax benefits for the premiums paid (Rs 25,000 for self, spouse and dependent children; Rs 50,0000 for senior citizen parents, as applicable).

Senior adults can also claim a deduction of up to Rs 50,000 for medical expenditures incurred throughout the year if they are not covered by any health insurance coverage.

Have you submitted your tax return? Here’s how to double-check it.

6.TAKING THE PROPER DEDUCTION FOR EXPENDITURES, TUITION FEE AND OTHER EXPENSES

It’s worth noting that in some cases, even if no new investment is made, tax benefits can be obtained in conjunction with specific expenditures, such as Rs 5,000 for preventative health check-ups. However, the deduction for medical expenses is limited by the overall maximum set forth in section 80D, which includes the above-mentioned health insurance premiums. Parents can also claim a tax deduction for tuition fees paid for their children’s education up to Rs 1.5 lakh under section 80C (within the overall maximum of Rs 1.5 lakh).

7.TAX RETURNS MUST BE FILED WITHIN THE TIMEFRAMES STARTED

It is impossible to overstate the importance of filing income tax returns and other statutory paperwork (where applicable) within the prescribed deadlines. The same aids in the creation of a correct tax record that may be used in the event of a tax investigation or verification by the authorities. In addition, filed income tax returns (ITR) must be submitted for a variety of reasons, including applying for immigration documents, home loans, loss carryovers, and certain high-value transactions. As a result, it is critical to file one’s ITR within the specified timeframes in order to avoid incurring interest or penalties.

8. A NEW TAX POLICY THAT IS MORE LENIENT

From FY 2020-21 onwards, the government will implement a new simplified optional personal income tax regime.

Individuals and HUFs will be allowed to pay taxes at reduced slab rates that are applicable without certain exemptions and deductions if certain requirements are met. As a result, one can compare the tax payments under the old and new tax regimes and choose the regime that is more tax advantageous.

9.THE NEED FOR DOCUMENTATION

While no papers are required to be uploaded when e-filing ITR, for a hassle-free engagement with the appropriate authorities, one should keep adequate records of investments made, such as PF account statements, passbooks, copies of insurance policies, pension plans, bank statements, and so on.