High-Value Transactions the Income Tax Department Tracks

Short answer: The Income Tax Department automatically tracks certain high-value financial transactions you make, such as large cash deposits, property purchases, and significant investments. Financial institutions report these transactions under a 'Statement of Financial Transactions' (SFT). This information is reflected in your Annual Information Statement (AIS), and any mismatch with your Income Tax Return (ITR) can trigger scrutiny. Therefore, it is crucial to ensure your declared income justifies your financial activities.

What are High-Value Transactions for the Income Tax Department?

These are specific financial transactions exceeding prescribed monetary thresholds that designated entities are legally mandated to report to the tax authorities. The purpose is not to tax the transaction itself, but to create a financial profile of the taxpayer and flag potential discrepancies where the scale of transactions does not align with the income declared in their tax returns. These rules help the department identify potential tax evasion without intrusive manual checks.

How does the Income Tax Department get this information?

They receive this information through a mandatory compliance requirement called the Statement of Financial Transactions (SFT), as specified under Section 285BA of the Income-tax Act, 1961. Entities like banks, mutual fund houses, companies issuing shares, and property sub-registrars are 'specified reporting persons'. They are required to file an annual SFT (Form 61A) detailing all the high-value transactions undertaken by their clients or customers during the financial year.

What transactions are reported under SFT?

Various transactions are covered under the SFT rules, each with its own reporting threshold. If your transactions cross these limits in a financial year, they will be automatically reported to the tax department. The key is that these limits are aggregate for the entire financial year.

Transaction Type	Threshold Limit (per financial year)	Reporting Entity
Cash deposits or withdrawals in a current account	Aggregate of ₹50 lakh or more	Bank or Co-operative Bank
Cash deposits in one or more savings bank accounts	Aggregate of ₹10 lakh or more	Bank or Co-operative Bank
Making one or more time deposits (Fixed Deposits)	Aggregate of ₹10 lakh or more	Bank, Post Office, Nidhi, NBFC
Payment of credit card bills	₹1 lakh (cash) or ₹10 lakh (any other mode)	Bank or Co-operative Bank
Purchase of bonds or debentures	Aggregate of ₹10 lakh or more	Issuing company or institution
Purchase of shares (including share application money)	Aggregate of ₹10 lakh or more	Issuing company
Purchase of mutual fund units	Aggregate of ₹10 lakh or more	Mutual Fund House
Purchase or sale of immovable property	Transaction value or stamp duty value of ₹30 lakh or more	Registrar or Sub-Registrar
Receipt of cash for sale of goods/services (excluding specified transactions)	Amount exceeding ₹2 lakh	Any person liable for tax audit under Section 44AB

Where can I see the transactions reported about me?

You can view all transactions reported by various entities in your Annual Information Statement (AIS) and Taxpayer Information Summary (TIS). These are available for download from your account on the Income Tax e-filing portal. It is essential to review your AIS carefully before filing your ITR to ensure there are no surprises. The AIS provides comprehensive details, which you can either accept or for which you can provide feedback if you find a discrepancy. For more details, read our guide on Form 26AS vs. AIS vs. TIS.

What happens if a reported transaction doesn't match my ITR?

If the department's automated systems find a significant mismatch between the high-value transactions reported in your AIS and the income you have declared in your ITR, it will likely trigger an inquiry. You may receive an e-campaign notice or a formal notice under sections like 143(1), 143(2), or 148A. You will be asked to explain the source of funds for these transactions. Failure to provide a satisfactory explanation can lead to the transaction amount being treated as unexplained income, which is taxed at a very high rate. Learn more about responding to an income tax notice.

Worked example

Mr. Sharma is a salaried individual in Bengaluru with an annual salary of ₹25 lakhs. During the financial year 2025-26, he undertakes the following transactions:

1. Sells an old family property: Sells a plot of land for ₹40 lakh. The Sub-Registrar will report this transaction as its value exceeds the ₹30 lakh threshold.
2. Deposits sale proceeds: Deposits the entire ₹40 lakh cheque into his savings account. This is not a cash deposit and hence is not reported under the ₹10 lakh cash deposit rule.
3. Pays off a personal loan in cash: Withdraws ₹12 lakh in cash over several months from his account and uses it to pay off an informal loan. The aggregate cash deposit into the lender's account will be reported by the lender's bank.
4. Invests in mutual funds: Invests ₹15 lakh from the property sale proceeds into various mutual fund schemes. The AMC will report this as the aggregate investment exceeds the ₹10 lakh threshold.

How the Income Tax Department sees this:

• AIS Entry 1: Sale of immovable property for ₹40 lakh.
• AIS Entry 2: Purchase of mutual funds for ₹15 lakh.
• AIS Entry 3: Cash deposits of ₹12 lakh will be flagged in the system associated with the account where the money was deposited.

Mr. Sharma's Compliance Actions:

1. Property Sale: He must calculate the capital gains on the ₹40 lakh sale. He can either pay tax on the gains or reinvest the proceeds as per Section 54F to claim an exemption. This must be correctly reported in his ITR. See our guide on capital gains on property.
2. Mutual Fund Investment: This is a valid use of funds and helps explain where part of the sale proceeds went. No tax is due on the purchase.
3. Cash Transaction: While Mr. Sharma withdrew the cash, the deposit into the other person's account is a reportable event. The department may inquire about the source of these funds if the recipient's ITR does not support it.

If Mr. Sharma files an ITR showing only his salary income and ignores the property sale, the department will immediately notice the mismatch with his AIS and issue a notice.

Common mistakes

1. Ignoring the AIS/TIS: Filing your ITR based only on your Form 16 without cross-referencing it with your AIS is a major error that leads to notices.
2. Splitting Transactions: Believing that depositing ₹9 lakh and ₹2 lakh separately in two different branches of the same bank will evade reporting. The bank aggregates all deposits linked to your PAN.
3. Using a Relative's Account: Routing your transactions through a parent's or spouse's bank account to avoid reporting. This is a violation and can cause serious trouble for them if they cannot explain the source of funds.
4. No Documentation: Failing to keep records to explain the source of funds, such as gift deeds, loan agreements, or sale documents. A gift from a relative is tax-free but must still be explainable.
5. Cash Repayments: Paying back large loans or making large purchases in cash. This creates a trail that is difficult to explain if the source of the cash itself is not from your declared income.

How SP & SC helps

Navigating the complexities of income tax compliance can be daunting, especially when high-value transactions are involved. SP & SC Legal and Taxation Services provides end-to-end assistance. We review your Annual Information Statement (AIS), advise on the correct reporting of all financial activities, and ensure your ITR is fully compliant. If you have received a notice regarding a transaction mismatch, we represent you before the tax authorities and draft legally sound responses. Our goal is to ensure your financial dealings are transparent and you remain stress-free. For a comprehensive review and ITR filing, explore our income tax filing services.

Frequently asked questions

H3: What is the penalty for not reporting SFT?

A reporting entity that fails to furnish the Statement of Financial Transactions (SFT) is liable for a penalty under Section 271FA of the Income-tax Act. The penalty can be ₹500 per day of default. For inaccurate reporting, penalties under Section 271FAA can also apply.

H3: What if the information in my AIS is incorrect?

If you find an incorrect entry in your AIS (e.g., a transaction is duplicated or wrongly attributed to you), you can submit feedback directly on the income tax portal. You can mark the transaction as incorrect, not attributable to you, or provide other relevant information. The department will then take this feedback into consideration.

H3: Are NRI transactions also reported?

Yes, the SFT reporting requirements apply to transactions regardless of the residential status of the individual, as long as the transactions occur with a reporting entity in India. Banks and other institutions will report transactions of NRIs that cross the specified thresholds. You can learn more about taxes for NRIs in our NRI tax guide.

H3: Is buying gold or jewellery reported?

A purchase of jewellery, bullion, or other high-value goods for more than ₹2 lakh in cash requires the seller to collect the buyer's PAN. Furthermore, if the seller is subject to a tax audit, they are required to report any cash receipt exceeding ₹2 lakh for the sale of goods/services under SFT.

H3: Can I file an updated return if I missed reporting a transaction?

Yes. If you have discovered a mismatch or forgotten to include income related to a high-value transaction, you can file an Updated Return (ITR-U) under Section 139(8A). This allows you to declare the additional income and pay the applicable tax, along with an additional tax, provided certain conditions are met. Read more about revised and updated returns.

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Worried about a high-value transaction or received a notice from the tax department? Don't wait. Share your documents with us, and we'll provide a written, fixed-fee quote for handling the matter from start to finish. Contact SP & SC today or WhatsApp us at +91 90356 74566. We are here to resolve your tax and legal challenges, end to end.