National News: The numbers from the financial year 2023–24 have revealed a surprising truth — just 6.68% of India’s population filed their Income Tax Returns (ITRs). This raises a pressing question: have the rest of the population simply evaded the tax net?
The answer: absolutely not. Today, the Income Tax Department keeps a close watch on all major financial activities — earnings, deposits, withdrawals, purchases — whether you file taxes or not. If something looks off, a notice can land in your inbox before you know it.
Where Does the Tax Department Get Your Financial Data?
According to tax expert Vivek Jalan, Partner at Tax Connect Advisory Services LLP, the IT Department relies heavily on data provided by banks, NBFCs, mutual fund companies, registrars, and sellers of high-value goods. These institutions are legally obligated to report certain types of transactions directly to the authorities.
What Kind of Transactions Are Flagged Automatically?
- Here are some common financial activities that trigger reporting:
- Cash deposits above 10 lakh in a savings account in a financial year.
- Cash deposits or withdrawals above 50 lakh in a current account.
- Fixed or recurring deposits above 10 lakh made in cash.
- Purchase of goods or services worth over 2 lakh in cash (like jewelry, electronics, or luxury goods).
- Credit card payments above 1 lakh in cash or 10 lakh via other modes in a year.
Every one of these can place you on the radar.
What Happens After These Reports Are Sent?
The IT Department compares this information with your declared income. If there's a mismatch — say your reported income doesn’t justify large cash deposits — it could result in your case being picked for CASS (Computer-Aided Scrutiny Selection). This means a notice might be issued, and you'll be required to explain the source of your funds.
Example: How You Might Get Flagged
Imagine a person who reports a business loss in their ITR but withdraws 1 crore in cash from their current account in the same year. If this isn’t supported by financial disclosures, it’s an instant red flag. The system detects this inconsistency, and the individual may receive a notice for scrutiny.
How Can You Avoid a Tax Notice? Simple Rules to Follow
1. Match Your AIS and Form 26AS Before Filing
Check your Annual Information Statement (AIS) and Form 26AS — they reflect your TDS, bank interest, stock market transactions, and more. Make sure your declared income aligns with these documents.
2. Disclose All Income Sources
Don’t limit your ITR to just your salary or places where TDS is deducted. Report all other income — from rent, capital gains, freelance projects, interest, dividend, or even cryptocurrency earnings.
3. Maintain Proper Records
Keep documentation such as bank statements, investment proofs, rent agreements, and loan papers ready. These become crucial in case of scrutiny.
4. File Your ITR Early and Accurately
Don’t wait till the last date. Early and accurate filing gives you more time to rectify issues and lowers chances of penalties.
No One Escapes the Tax Net Anymore
Just because most Indians didn’t file ITRs last year doesn’t mean they’re beyond the tax department’s reach. With today’s digitized systems, high-value transactions are closely monitored and matched with your tax filings. Filing your ITR on time, with full and truthful disclosure, is not just a legal obligation — it’s your best defense against scrutiny, penalties, or worse.
