Savings accounts are the primary channel for most day-to-day financial transactions, including payments, transfers, deposits, and withdrawals. However, routine use of a savings account can sometimes draw the attention of the Income Tax Department, according to various media reports. There are 10 common instances when savings account activity may trigger an inquiry. 

1. Large cash deposits

If you deposit ₹10 lakh or more in cash into any savings account during a financial year (April 1 to March 31), the bank must report it to the Income Tax Department. This applies whether the amount is deposited in a single transaction or in multiple instalments. For instance, depositing ₹12 lakh in cash without declaring it in your Income Tax Return (ITR) may trigger a notice.

2. Large credit card payments

Paying credit card bills in cash or via substantial bank transfers is also reportable. The department checks whether spending is in line with declared income. For example, if someone earns ₹6 lakh a year but pays over ₹1 lakh in credit card bills each month, authorities may question the discrepancy.

3. Frequent large cash withdrawals or deposits

Regularly withdrawing or depositing substantial sums, common for business or wedding expenses, is legal. However, repeated large cash transactions without a clear purpose may be flagged as “suspicious activity,” prompting officials to enquire about the source and use of the funds.

4. Property transactions

Buying or selling property worth ₹30 lakh or more is automatically reported to the department. Sudden large transfers into or out of your bank account may also be investigated to determine if they are linked to property deals. Authorities have recently identified cases where cash property transactions went unreported.

5. Foreign-related transactions

Spending over ₹10 lakh on foreign travel, education, or through forex cards falls under reporting requirements. The department uses this to verify that foreign exchange sources are legitimate.

6. Sudden activity in dormant accounts

If an old or inactive account suddenly receives or disburses a large sum, banks may flag it as unusual and report it to the department, especially if the account previously saw little or no activity.

7. Discrepancies in interest or dividend income

Interest or dividends credited to your account but not declared in your ITR can create mismatches. The department now uses automated systems to compare bank records with tax returns.

8. Multiple accounts with unreported interest

Maintaining several accounts for salary, household expenses, or investments is common, but failing to report total interest or transactions across these accounts can attract scrutiny. Data from multiple accounts is now linked through PAN and Aadhaar.

9. Money from undeclared or unexplained sources

Large deposits from unclear sources, such as “borrowed from a friend,” “household savings,” or “gifts,” may be considered unaccounted income if there is no supporting documentation.

10. Transactions on behalf of others

Using your account for someone else’s payments or receiving money in another person’s name can also be flagged. Authorities may view such transactions as potential money laundering or benami activity.

How the department detects these transactions

Banks and financial institutions submit annual Specified Financial Transaction (SFT) reports to the Income Tax Department. These include cash deposits above ₹10 lakh, significant investments, property transactions, and credit card spending. The department then links this data with PAN and Aadhaar numbers to identify responsible parties.