The Income-tax Department is intensely monitoring bank deposits, withdrawals, and high-value transactions. This increased scrutiny is driven by sophisticated data analytics and mandatory reporting rules designed to match your banking activity with your declared income.
1. Mandatory High-Value Transaction Reporting (SFT)
Banks and financial institutions are required to file Statements of Financial Transactions (SFT) for specific high-value activities. This data is automatically reported to the CBDT and appears in your Annual Information Statement (AIS) and Form 26AS, allowing tax authorities to cross-check everything you do.
Key Reporting Thresholds (Aggregate per Financial Year):
| Transaction Type | Threshold |
| Cash Deposits/Withdrawals from Savings Accounts | ₹10 lakh or more |
| Fixed Deposits (Time Deposits) | ₹10 lakh or more |
| Credit Card Payments (Non-cash) | Exceeding ₹10 lakh |
| Credit Card Payments (Cash) | Exceeding ₹1 lakh |
| Property Transactions (Purchase/Sale) | ₹30 lakh or more |
| Cash Deposits/Withdrawals from Current Accounts | ₹50 lakh or more |
2. The Danger of Inconsistency
Alerts are automatically triggered when your bank activity doesn’t align with your reported income.
- Income Mismatch: Large or frequent deposits that are inconsistent with the income you declared in your tax return are the primary red flag.
- Suspicious Patterns: The system can flag “structuring”—unusually fragmented cash transactions designed to stay just below the reporting thresholds (like ₹10 lakh). These are often seen as suspicious attempts to hide funds.
- Large Withdrawals: Even irregular cash withdrawals, especially in current accounts (₹50 lakh+) or those incurring TDS under Section 194N (over ₹1 crore), may invite verification to ensure they are for legitimate purposes.
3. Focus on Foreign Currency and Assets
Activities involving international travel, investments, and foreign currencies face enhanced monitoring under anti-money laundering and FATCA/CRS frameworks.
- Red Flags: Unexplained large remittances, overseas property purchases, foreign investments, or credit card spending abroad that exceeds your known financial capacity can trigger scrutiny. You must disclose all foreign income and assets in your tax return and ensure they are backed by FEMA-compliant documentation.
The Best Defense: Transparency and Documentation
The Income-tax Department is using AI-driven analytics to identify minor inconsistencies. The best way to avoid scrutiny is proactive compliance:
- Review Your Data: Regularly check your AIS and Form 26AS. Ensure all income, TDS credits, property deals, and investment details match your personal records and your filed ITR.
- Document Everything: Maintain complete supporting records (e.g., deposit slips, gift deeds, sale documents, Form 16s) for all major financial inflows and outflows.
- Correct Mismatches: If you find discrepancies in your AIS, submit online feedback or correction requests immediately.
The Key Takeaway: With the tax department accessing more third-party data than ever before, transparency and maintaining consistent, verifiable records are essential to prevent automated tax notices.
