Last Updated: January 18, 2023, 17:16 IST
Every bank and financial institution in India is instructed by law to report certain specified transactions executed by individuals to the Income Tax (IT) department, which keeps a record of high-value transactions to curb the problem of tax evasion. This rule applies not just to credit cards, but transactions above a certain limit will prompt the bank to inquire about its source. Due to this reason, the customers are advised to use their credit cards with care and file the IT returns as per income and expenses. Customers should also ensure that their income tax returns are in sync with details in the form 26AS.
Reportedly, form 26AS has been amended by the IT department to include high-value transactions. Part E of form 26AS includes information about high-value transactions. These should be included in the section during income tax filing.
But the question arises, what prompts customers to use their credit cards beyond a certain limit? Credit card companies offer reward points and cashback benefits. These facilities can lead people to use their credit cards for large transactions to secure discounts. Since a credit card is an electronic payment medium, every transaction gets logged in the system and goes on a permanent record. Thus a large transaction will be easily visible to the IT department and call for action.
When does the IT department take action?
Bank will send a notice to the IT department, in case the credit card bills cross the amount of Rs 1 lakh or consumers make a purchase of Rs 10 lakh and more. This can call for scrutiny of your accounts by the IT authorities. Banks, registrars, companies and post offices are required to submit form 61A, which is called the statement of financial transaction. Following this report, the investigative wing of the IT department will evaluate the high-value transaction and verify whether the same has been reported in the IT filing by the individual or not.
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