Income Tax: If you’ve ever wondered whether the income tax department monitors cash transactions between close family members, such as between a father and son or husband and wife, you’re not alone. With the increasing scrutiny of financial activities, it’s essential to understand how these rules apply within a family.
Does Income Tax Send Notices for Cash Transactions?
Tax experts clarify that if a husband gives money to his wife for household expenses or as a gift, this amount is considered the husband’s income. The wife, in this scenario, is not liable for income tax, and she will not receive a notice from the Income Tax Department. However, if the wife invests this money repeatedly and earns an income from these investments, the resulting income is taxable in her name. The income tax on such investment returns will be calculated annually, and she will need to pay the applicable taxes.
Restrictions Under Sections 269SS and 269T
According to Income Tax Sections 269SS and 269T, there is a limit on cash transactions exceeding Rs 20,000. Transactions over this amount can attract penalties. However, the law provides exemptions in certain situations, particularly in dealings between close relatives.
Exemptions on Penalties for Family Transactions
The good news is that transactions between close relatives, such as between father and son or husband and wife, are often exempt from penalties under these sections. This means that while cash transactions within the family are generally safe from penalties, any income earned from investing that money may still be subject to tax.
Final Takeaway
Understanding these nuances can help you navigate financial transactions within your family more confidently. While routine cash transfers for expenses or gifts are typically safe, be mindful of the tax implications if those funds are invested and generate income. Always consider consulting with a tax professional to ensure compliance with the latest regulations and to avoid any unexpected tax liabilities.
Keep watching our YouTube Channel ‘DNP INDIA’. Also, please subscribe and follow us on FACEBOOK, INSTAGRAM, and TWITTER