Income Tax News: Financial planning must include investing, but it’s critical to realize that some investments may attract the attention of the Income Tax Department. Here are five potential income tax notice-triggering areas for your assets, along with helpful tax savings advice.
High-Value Property Transactions
Acquiring real estate entails substantial financial outlays, and high-value transactions are closely monitored by the Income Tax Department. You have to notify the tax authorities if you invest in real estate valued at more than ₹30 lakh. If you don’t, you could get a notice. If you want to reduce your taxes, you can claim Section 24 deductions for home loan interest paid and Section 80C deductions for principle repayment.
Cryptocurrency Investments
In many tax countries, cryptocurrencies are still considered murky territory. All bitcoin investment profits are subject to taxation in India. Underreporting or failing to disclose such gains may result in notification. Make sure you correctly report your profits and keep thorough records of all of your transactions. Although there aren’t any particular tax-saving options for cryptocurrency investments, according to the law will shield you from trouble down the road.
Foreign Assets and Income
If foreign stocks, mutual funds, or real estate investments are not properly declared, they may also result in an income tax notice. You must report these investments in accordance with the Income Tax Act and the Foreign Exchange Management Act (FEMA). Use the benefits of the Double Taxation Avoidance Agreement (DTAA) to save taxes by avoiding paying taxes on the same income twice.
Large Cash Deposits
Large cash deposits into your bank account, particularly after demonetization, may cause the tax authorities to become suspicious. In a fiscal year, every cash deposit above ₹10 lakh must be disclosed. Keep track of the source of funds and use banking channels for significant transactions to prevent notifications. Keeping a transparent financial trail would be made easier by using digital payments and banking services.
Unreported Business Income
Purchasing a business or getting large returns on investments made in businesses without properly disclosing your financial activities may draw attention. Make sure that every expense and income from your firm is accurately recorded and included in your tax forms. Take advantage of the deductions for business-related costs under Sections 80C, 80D, and other applicable sections to save taxes.
How to Save Tax
Invest in vehicles that maximize tax savings, such as PPF, NPS, ELSS funds, and fixed deposits, since they qualify for tax deductions under different provisions of the Income Tax Act. In addition, you may minimize your tax burden and prevent tax notifications by keeping thorough and transparent records of every transaction and by consulting a tax specialist.