10 Common Savings Account Transactions That Can Put You Under the Income Tax Department’s Radar – Explained Clearly

1. Large Cash Deposits – The First Red Flag for I-T Eyes

Let me tell you, the day I deposited ₹3 lakh in cash from selling my old bike and some furniture, I didn’t expect a notice from the Income Tax Department! Turns out, banks automatically report large cash deposits if they cross ₹10 lakh a year across all your savings accounts. The logic’s simple—big cash flows should match declared income.

The real issue isn’t about the deposit itself; it’s the source. If you can’t prove where the money came from, that’s when things get messy. I learned to keep sale agreements, gift letters, or even old receipts handy. Once you have documentation, you can sleep peacefully knowing your cash isn’t “unexplained.”

A good habit? Note down every large deposit with a brief description in your diary (or your phone). That one tiny step can save you hours of panic later.

2. Paying Huge Credit Card Bills from Savings Account

I once went on a gadget-shopping spree—don’t judge!—and paid my credit card bill from my savings account. A few months later, I saw the same payment in my AIS under “high-value transactions.” Apparently, if you pay more than ₹10 lakh (or ₹1 lakh in cash) on cards annually, the I-T department gets a copy.

That’s when I realized how spending patterns matter. Even if the money is yours, large card payments that don’t align with your income can look fishy. My fix? I started tagging my payments and checking if they sync with what I declare in my tax returns. Simple and effective!

Lesson learned: spend freely, but document wisely.

3. Frequent or Large Cash Withdrawals That Look Suspicious

Cash withdrawals always feel harmless—until they don’t. When I withdrew ₹2 lakh in one go for a family function, the bank didn’t care, but my AIS sure did. Apparently, frequent or unusually large withdrawals can make the system wonder if you’re hoarding cash or paying someone under the table.

If your withdrawals make sense for your income, you’re fine. But if you’re a salaried employee suddenly pulling out lakhs regularly, it might draw questions. These days, I withdraw only when necessary and keep proofs like bills or invoices. Trust me, justifying it later is way worse than planning now.

4. Property Transactions Above ₹30 Lakh

Property is a big one. Every transaction above ₹30 lakh—sale or purchase—is reported. When my cousin sold his flat for ₹42 lakh, both his and the buyer’s PANs were recorded in the system. He didn’t declare the gain properly and soon got a friendly notice.

Moral of the story? Always check the circle rate and declare what you receive. The IT department doesn’t love “under-the-table” differences. And yes, if you’re the buyer, explain your source of funds too. A small paper trail keeps your peace of mind intact.

5. Dormant Accounts Suddenly Becoming Active

Remember that old bank account you opened in college? I reactivated mine after five years, deposited some side hustle income, and—bam!—it appeared in my AIS. The IT guys must’ve thought I discovered hidden treasure.

When an old, inactive account suddenly sees movement, it triggers scrutiny. The fix is easy though: inform your bank about the purpose of the transaction and maintain proper entries in your ITR. Keeping things transparent avoids any suspicion.

6. Foreign Currency Spends and Transfers

Here’s one I didn’t expect—my first international flight tickets triggered a flag. I’d paid through my forex card, and since my total overseas spend was over ₹10 lakh that year, it was reported. The IT system keeps tabs on large foreign transactions to prevent unreported income transfers.

If you’re traveling abroad or studying overseas, just make sure all spends are traceable to declared income. I started keeping my travel itineraries and forex receipts in one folder—sounds geeky, but it works!

7. Bank Interest Mismatch in Your Tax Return

This one hit me where it hurt—my pride. I forgot to include ₹900 interest from a small savings account. The IT system spotted it instantly from the bank’s report. Even the tiniest mismatch can trigger a message.

Now I religiously check my Annual Information Statement (AIS) and Form 26AS before filing returns. Every rupee of interest needs to be declared—even if you think “it’s too small to matter.” Spoiler: it always matters!

8. Dividend and Capital Gains Reporting Issues

If you invest in stocks or mutual funds, listen up. Every dividend, even a few hundred rupees, gets reported to the IT department. I learned that the hard way when my dividend income didn’t match what the broker had submitted.

It’s easy to forget small credits, especially when multiple platforms are involved. My hack? I use one spreadsheet that automatically fetches all dividends and capital gains. It’s boring work, but it saves me from headaches later.

9. Multiple Accounts and Undeclared Interest

I once had four savings accounts—salary, personal, joint, and one from college. Guess what? I only declared interest from one. The system didn’t like that.

Multiple accounts are fine, but undeclared interest isn’t. The IT department links all your PAN-connected accounts, so total interest must be declared. I closed two accounts and started tracking total yearly interest from all banks together. Simple math, big relief.

10. Shared Cards or Third-Party Payments from Your Account

This one’s tricky. A friend used my debit card for a big online order, then reimbursed me in cash. My account suddenly had a large deposit—and it looked suspicious. It wasn’t illegal, but I had to prove it wasn’t income.

Now, I politely say “no” when someone asks to use my account or card. If I must help, I use online transfers for transparency. It’s just not worth explaining a friend’s purchase to the taxman!

Conclusion

At the end of the day, most of these “red flags” are just automated checks, not accusations. The Income Tax Department simply wants data consistency. If you keep receipts, declare honestly, and avoid sketchy cash moves, you’ll never have to worry.

Think of it like cleaning your financial closet—boring, but necessary. So go ahead, check your AIS, reconcile your accounts, and stay ahead of surprises. And hey, if you’ve ever dealt with an I-T notice, share your story below. You never know who might learn from it!

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