How to plan your transactions
with an eye on Taxman
By Shiv N. Majumdar
Making your investments keeping your tax liability
in mind is widely followed by all of us. But the fact that
the basis of your tax liabilities may not be restricted
to your income tax returns only, but extend to all the transactions
that you have entered into during the year, is often missed.
Consider that you earned some income in cash
but deposited the same in your wife's name in a bank account.
Do you think it is wife's money and therefore you need not
be liable for the same? You would do well to note that income
tax liability is irrespective of how you disposed of your
income.
On the other hand, if your wife declares this
deposit as her income, this is also not backed up by a transaction.
No cash or cheque may flow in a transaction,
if it is in kind. But a transaction will have to pre-exist
earning of your income.
Your liability to tax arises when income is
earned as a result of transactions entered into by you.
Therefore, your transactions, if not reflected properly
in your income tax return, may land you into deep trouble.
For a peaceful management of your tax liability,
it is, therefore, essential to be rigid at the time the
event represented by your transaction takes place.
Let us consider the various common types of
transactions and how you can be watchful about them.
Bank Account:
If you deposit cash aggregating Rs 50,000 or more on any
one day, your transactions come within scrutiny. Banks are
required to keep track of them. It would be advisable to
also keep note of similar care when you withdraw Rs 50,000
or more in cash in aggregate in a day.
Telephone charges:
When you apply for a telephone or mobile phone connection,
you are declaring your PAN number. Telephone bills paid
by cash or cheque are easily relatable as your expenses.
Post Office Savings Bank Account:
If you deposit more than Rs 50,000 in cash in such an account,
you would come in the radar.
Bank Fixed Deposits:
Bank fixed deposits above Rs 50,000 with a bank.
Purchase of bank drafts or pay orders or
bankers' cheques:
If you purchase these for an aggregate of Rs 50,000 or more
in cash in a day from a bank, your transaction is tracked.
Payments to hotels and restaurants:
Hotel and restaurant payments against their bills for more
than Rs 25,000 is tracked either through cheques or by PAN
number if it is in cash.
Payments in connection with travel to a foreign country:
Unless you are traveling to a neighbouring country, any
such payments including for purchasing foreign currency
if made in cash and if it is in excess of Rs 25,000 are
tracked.
Sale or purchase of immovable property:
Such transactions valued at Rs 5 lacs or more need declaration
of PAN number. It would be advisable to consider the value
determined for stamp duty calculations.
Sale or purchase of a motor vehicle:
All such transactions are tracked.
Sale and purchase of securities:
Sale and purchase contracts of a value exceeding Rs 1,00,000
involving shares, scrips, stocks, bonds, debentures, debenture
stock or other marketable securities, mutual fund units,
rights or interest in securities etc are coming in income
tax radar.
