If an individual plans to go for a holiday, then it needs to be kept in mind that expenses which exceed Rs 2 lakh in a year, can attract tax. Scrutiny occurs only if the income does not support such expenses. So, one must keep a record of how the trip was financed.
If the expenses go beyond Rs 2 lakh and the income tax return (ITR) does not have the capacity to support such spending, a tax notice might be received. Therefore, ITR findings must be consistent with lifestyle and spending habits.
Tax authorities are careful of large transactions. If credit card bills over 1 lakh are paid in cash, it may attract the tax authorities. They might suspect that the funds are from undisclosed sources, prompting further investigation.
Real estate transactions attract tax authorities if the purchase is valued at over Rs 30 lakh. It is checked whether the declared income justifies such an expenditure.
Transactions made by entrepreneurs above Rs 50,000, tax authorities may get doubtful as no proper documentation can raise a red alert for possible ‘tax evasion’.
