Your savings account is a part of your everyday life — salary credit, bill payments, EMIs, or money transfers from friends and family. All of this seems normal, but did you know that
The department’s Data Monitoring System, through the Statement of Financial Transaction (SFT), now keeps track of high-value financial activities to detect possible tax evasion. It’s not just wealthy individuals — even ordinary account holders can come under scrutiny if their bank activity looks unusual.
Here are seven common bank transactions that could draw attention from the tax authorities.
Withdrawing or depositing large sums repeatedly, for instance, during business dealings or weddings — is legal but can still look suspicious.
Banks are required to monitor and report any unusual cash activity, and the tax department may ask, “Where did the money come from and where did it go?”
If you deposit Rs 10 lakh or more in cash into your savings account during a financial year (April to March), your bank must report it to the Income Tax Department.
It doesn’t matter if the deposits are made in one go or spread over several months, the total amount is what matters. For example, if Rs 12 lakh in cash is deposited but not shown in your ITR, the tax department may issue a notice seeking clarification.
Paying high-value credit card bills, especially in cash or through large bank transfers, can also raise flags. The department compares your income and spending patterns.
If your annual income is Rs 6 lakh, but you’re paying credit card bills worth Rs 1 lakh every month, it may signal that your actual income is higher than declared.
If you’ve spent over Rs 10 lakh on foreign travel, education, or using forex cards, that information is also shared with the Income Tax Department.
The goal is to ensure the money spent abroad comes from legitimate, declared income sources.
Buying or selling property worth Rs 30 lakh or more is automatically reported to the tax department.
If your account suddenly shows a big inflow or outflow linked to such transactions, officials may check whether it relates to a property deal — and whether it has been declared correctly in your returns.
Depositing a large sum without a clear or documented source, like saying it’s a ‘gift,’ ‘loan from a friend,’ or ‘household savings’, can also lead to questions.
If you cannot provide proof or supporting documents, the amount may be treated as unaccounted income, leading to possible tax action.
If an account that has been inactive for months suddenly sees large deposits or transfers, banks may report it as suspicious. This is particularly true when the account had no prior pattern of transactions and suddenly becomes active with high-value movements.
In other words, staying aware of these rules can help you avoid unnecessary scrutiny from the tax department. Always keep records of your transactions and ensure your financial activities match your declared income.