The Taxman Is Watching You!

Do you remember those pesky email chains that your uncle religiously forwarded to everyone in your family? And you had to forward it too if you didn’t want a lifetime of bad health/bad finances/bad luck (or some combination of the three)?

You probably do. So do I. Rather vividly. But I love technology. Such emails automatically get filtered to spam now. Which is why I find myself scratching my head when the same messages are forwarded to me on WhatsApp. I thought people had had enough of this junk in the email era, but no. History must repeat itself.

Out of the plethora of scammy, spammy and otherwise useless WhatsApp forwards received by a friend yesterday, one seemed to have a sliver of truth. So we decided to dig deeper.

It detailed scenarios under which certain high-value transactions are reported to the I-T Department by banks, mutual funds, companies and property registrars. And how a mismatch between your IT returns and these third-party transaction reports can bring you under the IT scanner.

At the conclusion of our dig, we were stunned to discover that each and every statement in the message was true! We had come across something rarer than the Kohinoor. We had found the first ever factually correct forwarded message!

We verified the information from none other than the Tax Information Network of the IT Department, in addition to The Hindu Business Line and India Today. Personal finance blog ReLakhs also weighed in.

The tl;dr/summary version? FILE YOUR TAXES CORRECTLY AND ON TIME! Make sure to report all your income and deductible expenses under the correct heads.

If you’re curious, here is the text of the forwarded message:

How to Maintain Safe Distance from Income Tax Department

Do you want to keep an Arm’s Length Distance from the Income Tax Department?

Obviously the Answer is YES!!! But the question here is HOW???

A)    Here are a list of expenses/investments, which at any point of time performed by you may invite undue attention from the Income tax Personnel.

  1. Depositing Cash aggregating to Rs.10 Lacs p.a. in your Savings Bank Account.

  2. Making Credit Card Payments of more than Rs.2 Lacs p.a.

  3. Investment in Mutual Fund Units worth more than Rs. 2 Lacs.

  4. Investment in Debentures/ Bonds, amounting more than Rs. 5 Lacs.

  5. Investment in Shares worth more than Rs. 1 Lakh.

  6. Investment in Gold ETF worth more than Rs. 1 Lakh.

  7. Investment in RBI Bonds worth more than Rs. 5 Lacs.

  8. Purchase/Sale of any Immovable Property exceeding Rs.30 Lacs.

  9. Receipt of Cash Payment exceeding Rs.2 Lacs for sale of any goods/ services.

  10. Cash deposits or withdrawals aggregating to Rs 50 lakh or more in a financial year in one or more Current Account.

B) The Next question which may strike us, is how does the Income tax Personnel get to know about all these activities.

To keep an eye on such high value transactions of the tax payers, the IT Department has developed a statement of financial transactions called Annual Information Report (AIR).

On the basis of this AIR, the department shortlists their targets and further sends them a notice.

C)  What do you mean by a Annual Information Report?

Annual Information Return (AIR) of ‘high value financial transactions’ is required to be furnished under section 285 BA of the Income-tax Act, 1961 by ‘specified persons’ in respect of ‘specified transactions’ registered or recorded by them during the financial year.

D)Who provides the high value transaction information to prepare the AIR?


Mutual Fund Companies

Companies Issuing Bonds/ Debentures

Companies issuing shares

Credit Card Companies

Sub- registrar offices on real estate deals.

E) How can I trace my High Value Transactions reported under AIR?

The assessee can trace his/ her high value transactions reported under AIR, in their 26AS Report under AIR section. Any transaction of the assessee which has been categorized as a High Value Transaction, will be reflected therein.

F) In the end, one last question which everyone might have. How to avoid receiving a notice from the IT department.

The most important step is to file your Income Tax returns on time and file them correctly.

Always re-check your Tax Credit with the 26AS statement.

Disclose all your Taxable as well as Exempt income under the right head.