Income Tax notices can make anyone worried. Nowadays, the Tax Department uses Artificial Intelligence (AI). Because of this, Income Tax notices are sent to people who keep large amounts of money in their bank accounts or make big transactions. If you get a notice and do not respond properly, you may face trouble from the Income Tax Department. To avoid this, you should follow some simple rules.
CA C. Kamlesh Kumar, Taxation Partner at Ravi Rajan & Co LLP, Delhi, says that if you have a savings account, you should follow these rules. Do not make very large transactions at once. This does not mean you cannot deposit money. You can deposit as much money as you want. But if you deposit large amounts at once, the Income Tax Department may watch your account.
Banks Follow Tax Department Instructions
Banks have instructions from the Income Tax Department. They are told to inform the department if there is a large transaction in any account. Generally, if ₹10 lakh or more is deposited in your savings account in a year, the bank can report it to the Income Tax Department. If there are repeated large transactions and the source of money is unclear, your account can come under suspicion. In such cases, the Income Tax Department may take action and send you a notice.
Rules to Follow in Your Savings Account
Watch Large Transactions: If you deposit ₹10 lakh or more, the bank can report it. The tax department may ask about the source. If you cannot explain it, you may get a notice.
Avoid Continuous Big Transactions: If you deposit and withdraw large amounts regularly, the bank may find it suspicious and report it to the tax department.
Provide Correct Information: Always tell the bank the true source of money. Keep papers if the money comes from someone else. For example, if a relative gives you ₹10 lakh, keep documents showing it.
Have PAN and KYC Done: For big transactions, complete your PAN card and KYC process.
Be Ready for Bank Questions: Banks monitor accounts, especially for unusual transactions. If the bank finds something wrong, it may ask where the money came from or send a notice.
