The Income Tax Department of India has surged the tracking of high-value credit card transactions according to its efforts to curb tax evasion and assure effective tax compliance.
How IT Dept Monitoring High-value Credit Card Transactions?
In the section below, we discuss the procedure used by the income tax department to monitor high-value credit card transactions:
Tax Scrutiny of Transaction Patterns
The same department investigated these high value credit card transactions to fetch any differences between the spending of the assesses and their reported income. For instance when a person spends much more on luxury items or travel but shows a modest income then it might trigger an investigation.
Prerequisites of TDS and PAN
Banks and credit card issuers towards large credit card payments may need you to provide your Permanent Account Number (PAN). Indeed high-value cash payments for credit card bills of more than Rs 1 lakh are also mandated to get notified.
I-T Notice to Non-Filers and Under-reported Income
If the department discovers discrepancies, it may impose notices to the taxpayers who either do not furnish the returns or underreport their income. The same could happen if credit card spending looks disproportionate to the income shown in income tax returns.
Voluntary Exposure and Taxpayer Compliance
The assesses to prevent the problems are motivated to ensure that their credit card spending is in line with their shown income and to file the precise returns within the stated time. Penalties, interest, and even prosecution in extreme cases of evasion are the consequences of the discrepancies.
Notify for High-Value Transactions
Credit card companies and banks are mandated to notify specific high-value transactions to the income tax department as per the Statement of Financial Transactions (SFT) rules. In a Fiscal year, the limit to notify is Rs 10 lakh (₹1 million) for credit card payments. It directed that when an assessee spends Rs 10 lakh or more using their credit card the transaction is notified to the tax authorities.
Examine Big Data and AI
Advanced data analytics would be used by the income tax department along with Big Data and AI, to examine high-value transactions in distinct sectors, along with credit card transactions. It assists them in fetching peculiarities and cases of tax evasion effectively.
Conclusion: Such actions are counted under the wider initiative of the government to ensure clarity and curb black money circulation. Hence credit card users must maintain a transaction record and ensure their tax returns show their correct income and expenditure.
