Paying Tax genuinely shows your responsibility towards the nation. Being a citizen, it is our duty to contribute to the progress of the nation by paying our taxes genuinely. Not paying tax or trying to hide your income to save tax is a punishable crime. Being a responsible citizen one has to keep themselves away from the transactions which can make you get prosecuted under the income tax law.
The tax department of India has reported a quite high amount of tax fraudulent made by the citizen every year. The department has to face hundreds of cases of unpaid tax every year. To make the situation better, the tax department has become stricter and implemented laws to stop such illegal activities.
Sometimes it may happen that you are practising any of those prohibited transactions as you were unaware of the same. Here we have piled up some transactions which are considered illegal under the income tax law of India.
6 Transactions to Avoid
# Taking or Giving a Loan or Deposit More Than Rs. 20,000 in Cash
A person can be prosecuted and attract penalty under the Section 271D if he/she makes a cash transaction of more than Rs. 20,000 in taking or giving loans. In such cases, the lender and borrower both will have to pay the penalty. According to the income tax law, one cannot repay or receive a sum of Rs 20,000 or more in cash in the transaction of immovable property.
# Paying Cash More Than of Rs 10,000 in for a Business/Profession Purpose
The bigger transactions in business are very common. But if you make a business transaction of more than Rs.10,000 it will be considered as a fraudulent transaction.
# Making Cash Donation of Rs 2,000 or More to a Political Party or Registered Trust
The donation to registered trust can claim a tax rebate, but if you make a donation of Rs. 2000 or more in cash, you won’t be able to demand a tax rebate. Moreover, the political party or the trust may face legal actions for encouraging money laundering.
# Not Depositing TDS to the Government
In most of the everyday transactions, a taxpayer is required to deduct tax at source (TDS). Not paying the TDS is considered illegal in the eyes of law. Not paying TDS can have different consequences such as penalty payment, interest @ 1.5%, receiving prosecution notice if the default amount is more than Rs 5,00,000.
# Cash Transaction of Rs 2,00,000 and More for Buying a Flat, Jewellery Etc.
The purchase of a flat or jewellery needs bigger transactions. But be assured that your transaction above Rs. 2,00,000 must not go in cash. Making transactions more than the said amount can make both the parties face legal issues.
# If a Third Party Uses Your Name to Make Any Transaction
If it happens that a third party is using your name for any kind of transaction, the income tax department will charge the tax in your name. Moreover, you will be prosecuted for giving untrue information to the IT department.
The Lines of Caution
Such situations are not very uncommon when a person receives a legal notice from the tax department. In such situations, many of us may get panic. But the experts advise to keep calm and understand first the reason for the notice issued to you. Most of the times such notices are given for not getting enough documents or a difference between the return claimed and the data available to the IT department. In such situations, one can easily submit an explanation with requisite evidence. If you find the matter is serious and you can’t handle in on your own, you can always take help of tax advisors to help you resolve the issue.