Savings Overflowing? Explore Investment Options And Avoid Tax Suffering

Before falling into your bank account, be extra cautious! Tax authorities are keeping a close eye on large transactions under Rule 114E.

Keep an eye on such accounts

If your deposits or withdrawals cross the ₹10 lakh point in a year (across savings accounts, excluding current accounts and time deposits), the bank will report it to the tax department. 

Must be knowledgeable of Income Tax Rule 114E

Under Income Tax Rule 114E, banks report transactions exceeding ₹10 lakh (savings accounts) and ₹50 lakh (current accounts) per year to the tax department. So, before making high-value transactions, keep these limits in mind and ensure proper income disclosure to avoid unnecessary scrutiny.

Stay Aware, Stay Compliant: Know Your Reporting Points

Under the Banking Regulation Act of 1949, banks and cooperative societies must report specific transactions to the tax authorities. These include:

  • Cash payments of ₹1 lakh or more in a year towards any credit card bill(s).
  • Total payments of ₹10 lakh or more (using any method) towards any credit card bill(s) in a year.

Keep these limits in mind when settling your credit card bills. Any company or institution issuing these financial instruments must report transactions exceeding ₹10 lakh in a year to the tax authorities. This applies to both fresh investments and renewals in the case of bonds and debentures.

Companies listed on recognized exchanges must report any share purchase transactions amounting to ₹10 lakh or more from an individual in a financial year. This transparency requirement, mandated by Section 68 of the Companies Act 2013, ensures responsible trading practices and facilitates efficient tax administration.

Mutual fund investments exceeding ₹10 lakh in a year are tracked for tax purposes. The fund manager must report any individual contributions of this amount or more for acquiring units in one or more schemes (excluding transfers between schemes).

Foreign currency transactions exceeding ₹10 lakh per year trigger a reporting requirement. Authorized dealers under the Foreign Exchange Management Act of 1999 must report any sale of foreign currency by an individual exceeding this threshold in a single financial year. 

Your real estate deals exceeding ₹30 lakh are not invisible! Under the Registration Act of 1908, authorities track property transactions. Any purchase or sale of unmovable property worth ₹30 lakh or more must be reported by the relevant inspector general, registrar, or sub-registrar. 

Before making significant deposits or withdrawals from your bank account, remember Rule 114E.To avoid unnecessary scrutiny and potential tax implications, keep these limits in mind:

  • Deposits or withdrawals exceeding ₹10 lakh (savings accounts) or ₹50 lakh (current accounts) in a year.
  • Cash payments of ₹1 lakh or more towards credit card bills in a year.
  • Total payments of ₹10 lakh or more (any method) towards credit card bills in a year.
  • Transactions exceeding ₹10 lakh related to bonds, debentures, shares, mutual funds, and foreign currency sales.
  • Property transactions exceeding ₹30 lakh.