{"id":49815,"date":"2021-05-12T11:21:27","date_gmt":"2021-05-12T05:51:27","guid":{"rendered":"https:\/\/enterslice.com\/learning\/?p=49815"},"modified":"2022-09-10T18:12:56","modified_gmt":"2022-09-10T12:42:56","slug":"income-tax-department-trace-your-high-value-transactions","status":"publish","type":"post","link":"https:\/\/enterslice.com\/learning\/income-tax-department-trace-your-high-value-transactions\/","title":{"rendered":"How does Income Tax Department trace your High Value Transactions?"},"content":{"rendered":"

Did you ever wonder how income tax department gets information regarding your high value transactions? Well, we all know that they are not unaware about such transactions, but how do they get information about this. If you are looking for an answer for this question, then this is the place where you would want to be.<\/p>\n\n\n\n

Tracing High Value Transactions- Overview<\/h2>\n\n\n\n

So to first answer your question, the income tax department gets information about particular transactions through its sources. Based on such information, they match it with the information provided in the income tax returns by the taxpayer. The third-party information helps the department to find out the taxpayer who is looking to escape the tax liability or reporting requirements.<\/p>\n\n\n\n

With a view to widen the tax net, the IT department has employed the assistance of analytics to scrutinize the data to identify people who haven’t filed income tax returns or have underreported income despite performing a high value transaction.<\/p>\n\n\n\n

There isn’t any specific definition of such transactions. Various entities report transactions above a threshold done by a taxpayer, which is compared by the tax department with the income tax returns filed.<\/p>\n\n\n\n

Tracing High Value Transactions: Source of information<\/h2>\n\n\n\n
\"Tracing<\/figure><\/div>\n\n\n\n

Form 26 AS or TDS\/TCS statement<\/strong><\/p>\n\n\n\n

The tax department gets information from reports of tax deducted at source and tax collected at source. The tax deducted at source (TDS) on income or payment obtained by the taxpayer is reported to the department of income tax. For instance- interest on term deposits, fee from professional or technical service, salary etc. When tax is deducted at source on those payments, it is imperative that it is reported to the department of income tax through TDS returns<\/a><\/strong>. Such return has the deductees’ PAN number and transaction details. <\/p>\n\n\n\n

Likewise, when a seller collects tax at source on goods like motor vehicle, scrap etc., the seller files the Tax collected at source return, reflecting in the 26 AS of the buyer. Therefore in case of a mismatch in your income details provided in the income tax return and 26 AS Form may invite notice from the income tax department.<\/p>\n\n\n\n

The idea behind capturing such transactions is to assess the income source and to know if it is reflected in the income tax return or not. <\/p>\n\n\n\n

Statement of Financial Transactions<\/strong><\/p>\n\n\n\n

Statement of financial transactions refers to a report filed by specified persons under section 285 BA<\/strong>[1]<\/strong><\/a><\/sup>. It contains transactions exceeding the threshold limit, including expenditures and investments done by taxpayers in a financial year.<\/p>\n\n\n\n

Specified entities such as banks, mutual funds, bonds issuing institutions and registrars or sub-registrars should file Statement of financial transactions.<\/p>\n\n\n\n

The limit of different financial transactions in a financial year to be reported under the Statement of financial transactions is provided below-<\/p>\n\n\n\n