Which transactions are tracked by Income Tax Department and which aren't?

Tax

• PIB fact-check: ITD doesn't monitor emails, social media, or personal apps
• Only high-value financial transactions reported to ITD, not personal activity.
• Only discrepancies in taxpayer financial activity are scrutinized, not all activity.

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The Press Information Bureau’s (PIB) fact-checking unit has dismissed a viral social media claim suggesting that the Income-Tax Department (ITD) monitor citizens’ emails, social media accounts, online shopping, digital payments, and personal apps. The official clarification states that these assertions are misleading and not grounded in current legal provisions.

A widely circulated Instagram post by an account named 'bingewealth' triggered widespread concern by claiming that the ITD would have access to individuals’ private digital activities, including social media profiles, trading apps, and lifestyle-related data. In response, PIB Fact Check categorically rejected the claim in a post on its official X account.

“The Income-tax Department does NOT track online shopping, digital payments, app-based transactions, or any form of personal spending behaviour. There is no mechanism to monitor an individual’s digital or online activity,” PIB fact check mentions in X post.

The income tax department receives information only through statutory disclosures such as form SFT (Statement of Financial Transactions), which covers certain high-value financial transactions reported by banks and other specified entities. “This system is transaction-based, not behavioural or lifestyle profiling, and does not involve monitoring personal digital activity. As long as taxpayers correctly report income and major transactions, there is no cause for concern,” said Ritika Nayyar, Partner, Singhania & Co.

Which transactions are tracked?

As per Section 285BA of the IT Act read with Rule 114E of the Income-tax Rules, 1962, high value transactions aggregating to an amount beyond the prescribed thresholds in a financial year are required to be reported to the ITD by filing Statement of Specified Transactions in Form 61A. This is to ensure transparency and detect any tax evasion.

Rule 114E provides a list of such transactions which includes cash deposits above Rs 10 lakhs in savings account or in fixed deposit accounts, cash deposits/ withdrawals above Rs 50 lakhs in current accounts, credit card payments of Rs 1 lakh in cash or of Rs 10 lakhs in any other mode, receipts from any person above Rs 10 lakhs for acquiring bonds, debentures, shares or mutual funds, purchase or sale by any person of immovable property of amount Rs 30 lakhs or more, etc.

What should be monitored?

S R Patnaik, Partner (head - taxation), Cyril Amarchand Mangaldas, explains —

It should be kept in mind that only high value transactions are required to be reported to the ITD and there is no surveillance of all financial activity of taxpayers.

In case there is any discrepancy between the reported transactions which are linked to individual PANs and the income disclosed by taxpayers in their income tax returns, then the ITD may issue show cause notices which may lead to scrutiny or assessment proceedings.

However, if the taxpayers are able to justify the discrepancy concerning the high-value transactions in their reply to such show cause notices with adequate proof, then there will not be any further scrutiny or proceedings.