Income Tax Notice for High-Value Transactions (Cash, Credit Card, Deposits)

An income tax notice for a high-value transaction is triggered when a reporting entity files a Statement of Financial Transactions (SFT) under Section 285BA, or reports a TDS/TCS entry, that lands in your AIS and does not reconcile with your ITR. Banks, sub-registrars, mutual funds, card issuers, and authorised dealers are legally required to report transactions above set thresholds; the department's analytics then compare that data against your declared income. A mismatch, or a high-value entry with no return filed, generates an e-campaign alert or a formal notice under Section 143(1), 133(6), or 148A. The notice asks you to confirm, revise, or explain: it is a reconciliation request rather than an accusation of evasion.

A notice for a cash deposit is one of several types of income tax notice, and this page is the hub for every transaction-driven flag, from savings deposits to foreign remittances.

The pipeline is the same each time: a reporting entity files the SFT or a TDS/TCS entry, the figure populates your Annual Information Statement (AIS) and Form 26AS, the department's risk analytics score it against your return, and a mismatch produces a notice. Four vehicles carry that notice:

• e-campaign (Non-filing/Non-payment): a soft alert on the Compliance Portal asking you to confirm or explain a reported transaction before any formal notice is issued.
• Notice under Section 133(6): a request for information about a specific transaction, usually the first formal step after an SFT flag. This is the most common follow-up, explained on the Section 133(6) information notice page.
• Notice under Section 143(1): an intimation that adjusts your return where the reported figures do not match what you filed.
• Notice under Section 148A: a show-cause issued before reassessment where the department believes income has escaped assessment.

For the full list of reasons you receive an income tax notice, see the dedicated page; notices arising specifically from a property purchase are handled separately.

A high-value transaction is any transaction a reporting entity must report to the Income Tax Department under Rule 114E, or through TDS/TCS, ranging from ₹2 lakh cash sales to ₹50 lakh current-account deposits. The table below lists every reportable category, its exact reporting threshold, the entity that reports it, and the notice section it typically triggers. All figures are aggregate per person per financial year unless marked per-transaction, and all are current for FY 2025-26 (AY 2026-27). These are reporting thresholds that populate your AIS; they are not, by themselves, taxable amounts, and tax and notices arise only when a reported transaction is unexplained or omitted from your return.

Most reportable categories share a ₹10 lakh line, though current-account activity runs to ₹50 lakh and cash withdrawals into crores; transactions above ₹10 lakhs are the ones that most often surface in your AIS.

These are reporting thresholds, not tax limits, and two points cause most of the confusion. First, the SFT reporting limits under Rule 114E are separate from the mandatory-ITR-filing triggers under the 7th proviso to Section 139(1) and Rule 12AB: depositing over ₹1 crore in a current account, ₹50 lakh in a savings account, spending ₹2 lakh on foreign travel or ₹1 lakh on electricity, a business turnover of ₹60 lakh, professional receipts of ₹10 lakh, or TDS/TCS of ₹25,000 or more each forces you to file a return even below the exemption limit, but that is a different list from what gets reported. Second, cash withdrawals under Section 194N and foreign remittances under Section 206C(1G) reach your AIS through TDS or TCS, not the SFT, and SFT-003 covers cash deposits and withdrawals in current accounts in both directions.

A cash deposit of ₹10 lakh or more in one or more savings accounts in a financial year is reported to the department under SFT-004 and can trigger a notice; for current accounts the reporting threshold is ₹50 lakh under SFT-003. There is no legal ban on depositing these amounts: the reporting limit simply means the transaction appears in your AIS and Form 26AS, and the department may ask you to prove the source. Deposits that cannot be explained are treated as unexplained cash credits under Section 68 or unexplained money under Section 69A and taxed at a flat 60% base rate under Section 115BBE, which rises to about 78% after a 25% surcharge and 4% cess, with a further 10% penalty on the tax under Section 271AAC. Keeping deposits consistent with your declared income and retaining proof of source is the safeguard.

• Savings accounts: cash deposits aggregating ₹10 lakh or more in a financial year are reported under SFT-004.
• Current accounts: cash deposits or withdrawals of ₹50 lakh or more in a financial year are reported under SFT-003.

UPI transactions have no dedicated SFT code, but UPI and other digital credits aggregate into the same savings or current-account balance and count toward the ₹10 lakh and ₹50 lakh cash-and-deposit picture the AIS builds. High UPI business receipts routed through a personal savings account are a common and growing scrutiny trigger, even though UPI carries no threshold of its own. Separately, Section 269ST bars receiving ₹2 lakh or more in cash in a single transaction or from one person in a day, and breaching it attracts a penalty equal to the amount received under Section 271DA.

A worked example shows how the numbers play out:

A salaried taxpayer with ₹9 lakh declared income deposits ₹14 lakh cash across two savings accounts in FY 2025-26. The bank reports it under SFT-004; it appears in the AIS. Because ₹14 lakh exceeds both ₹10 lakh and the declared income, the taxpayer receives a Section 133(6) request. If ₹5 lakh cannot be sourced, that ₹5 lakh is taxed at 60% under Section 115BBE (₹3 lakh base tax, rising to about ₹3.9 lakh after the 25% surcharge and 4% cess) plus a 10% penalty on the tax under Section 271AAC (₹30,000).

Credit-card payments of ₹10 lakh or more in a financial year by any mode other than cash (or ₹1 lakh or more paid in cash) are reported under SFT-006 and can trigger a notice if they outpace your declared income. A cash withdrawal over ₹1 crore in a year attracts 2% TDS under Section 194N (2% over just ₹20 lakh if you have not filed ITR for the previous three years, and 5% over ₹1 crore), and that TDS entry appears in your AIS. Foreign remittances above ₹10 lakh under the Liberalised Remittance Scheme attract TCS under Section 206C(1G): 20% for most purposes, 5% for education or medical, which is also visible in the AIS. Foreign-currency purchases of ₹10 lakh or more are reported under SFT-011, and cash payments of ₹2 lakh or more for gold need PAN under Rule 114B. In each case the department is matching your spending or remittance to your income, not taxing the transaction itself.

• Credit cards: ₹1 lakh or more in cash, or ₹10 lakh or more by any other mode, in a financial year is reported under SFT-006 by the card issuer.
• Cash withdrawals: Section 194N deducts 2% TDS on withdrawals over ₹1 crore in a year; for anyone who has not filed ITR for the previous three years, it is 2% over ₹20 lakh and 5% over ₹1 crore. The TDS is creditable against your tax, but the withdrawal pattern can still draw an enquiry.
• Foreign remittance (LRS): Section 206C(1G) TCS applies to remittances over ₹10 lakh in a financial year, a threshold raised from ₹7 lakh with effect from FY 2025-26 under the Finance Act 2025. The rate is 20% for most purposes and 5% for education or medical; remittances for education funded by a loan from a financial institution are exempt from TCS, and the entry ties to the AIS foreign-remittance information and Form 15CA/15CB.
• Gold and jewellery: gold has no dedicated SFT code, but PAN is required under Rule 114B for purchases over ₹2 lakh, a cash bill of ₹2 lakh or more is reported under SFT-013, and TCS under Section 206C(1F) can apply on certain goods as an adjacent flag.

Purchases of immovable property of ₹30 lakh or more are reported under SFT-012 and are covered separately rather than duplicated here.

Money transferred into your account is not automatically taxable, but if you cannot explain its source the department can treat it as an unexplained cash credit under Section 68 and tax it. A genuine gift from a relative (spouse, parents, siblings, lineal ascendants/descendants) is fully exempt regardless of amount, but a gift from a non-relative exceeding ₹50,000 in a year is taxable as income from other sources under Section 56(2)(x). If a spouse or parent transfers money that you then invest, any income earned on it is clubbed back to the giver under Section 64. A ₹5 lakh transfer is below most SFT reporting thresholds, so the notice risk comes from an AIS mismatch or a Section 133(6) enquiry, not from an automatic report: keep the gift deed, loan agreement, or bank trail as proof.

The relative test is what decides it: transfers between close family are outside tax whatever the amount, while a non-relative gift is taxed once it crosses ₹50,000 in the year. A documented loan is neither a gift nor income, so a written agreement and a bank trail settle most enquiries.

Cryptocurrency and other virtual digital assets (VDAs) are not part of the Rule 114E SFT list, but crypto transactions are reported to the department separately through TDS under Section 194S, which exchanges deduct at 1% on transfers. Gains on VDAs are taxed at a flat 30% plus surcharge and cess under Section 115BBH, with no deduction other than cost of acquisition and no set-off of losses. Because exchange data and TDS entries appear in your AIS, a notice is issued when your ITR omits VDA income or the Schedule VDA that the AIS shows. Report every VDA transaction in Schedule VDA even if it resulted in a loss.

• Section 194S: exchanges deduct 1% TDS on VDA transfers, and that entry appears in your AIS.
• Section 115BBH: VDA gains are taxed at a flat 30% plus surcharge and cess, with no loss set-off, which is why an omitted crypto entry is a rising notice trigger.

Respond to a high-value transaction notice by logging in to the Income Tax e-filing portal and opening the relevant response window: the Compliance Portal for an e-campaign, or Pending Actions › e-Proceedings for a formal notice. First confirm the notice is genuine using "Authenticate Notice/Order Issued by ITD", then reconcile the flagged transaction against your AIS and bank statements. Where the transaction is correct and already taxed, submit a confirmation with proof of source; where your return missed it, file a revised return under Section 139(5) or an updated return under Section 139(8A). Always respond before the deadline stated in the notice: ignoring it can lead to a best-judgment assessment under Section 144, penalties, and recovery action.

1. Authenticate the notice with "Authenticate Notice/Order Issued by ITD", or authenticate the notice on the e-filing portal, before acting on it.
2. Read the section quoted and the deadline printed on the notice.
3. Open your AIS and download the SFT, TDS, or TCS information behind the flag.
4. Reconcile it against your bank statements and Form 26AS.
5. On the Compliance Portal e-campaign, select the correct response option: information is correct / is not fully correct / relates to other PAN or year / is duplicate / is denied.
6. Submit your response with documentary proof of source.
7. If income was omitted, file a revised return under Section 139(5) or an updated return under Section 139(8A).
8. For an unexplained-credit or Section 148A case, consult a practising chartered accountant before you reply, because the addition and penalty can be steep.

The proof that answers most cash-deposit and reconciliation notices is documentary. Keep and upload, as relevant:

• bank statements and past withdrawal history;
• past ITRs showing the money was previously withdrawn;
• business or cash-sale receipts;
• agricultural income records;
• sale-of-property documents;
• gift deeds or will documents.

Where the department believes income has escaped assessment, it can reopen the year under Section 148A. Under Section 149, the reassessment window then runs up to 5 years 3 months from the end of the relevant assessment year when the income escaping assessment is ₹50 lakh or more, and up to 3 years 3 months in normal cases, under the regime in force from 1 September 2024.