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How much do you spend every month on groceries, clothes, shoes, haircuts, and eating out at restaurants? The Income Tax (I-T) department wants to know!

Some people take out very little money from their bank accounts, even though they earn a lot. The I-T department is asking them how they manage their monthly expenses. The government is using data to check if people are hiding their real income to avoid paying taxes.

The tax department has sent letters asking for a full list of expenses—like how much is spent on food, gas, education, and even haircuts. These letters were sent only to people who seem to be earning a high income but spending very little, which looks suspicious. Officials think they might have secret cash earnings that they haven’t told the government about.

In some cases, the department has also asked for details of family members, their income, and their PAN numbers. If someone doesn’t provide these details, the tax department might assume they are spending ₹1 crore a year and charge taxes accordingly.

Earlier, a similar check was done on people who had income from other countries but didn’t report it. The tax department is working with other countries to share financial details and catch tax evaders.

In short, if you earn well but don’t show enough spending, the tax department might ask questions!

FAQ'S

1. Why is the Income Tax (I-T) department asking about my monthly spending?
The I-T department is investigating cases where individuals report high incomes but show very low spending. This is to check if they are hiding income or evading taxes.

2. Who is receiving these notices?
Only a select group of individuals who report high earnings but withdraw very little from their bank accounts have received these notices. The department suspects they might have undeclared cash income.

3. What kind of expenses do I have to disclose?
The department is asking for a detailed breakdown of household expenses, including spending on food, gas, education, shopping, restaurants, and even haircuts.

4. What happens if I don’t respond to the notice?
If you fail to provide the requested details, the I-T department may assume your household withdrawals are ₹1 crore per year and calculate taxes based on that estimate.

5. Can the tax department ask for my family’s details?
Yes, in some cases, the department has asked for details of all family members, their income, and their PAN numbers to verify financial records.

6. Is this a new rule?
Not exactly. The government has been using data analytics to track tax evasion for some time. A similar investigation was done earlier for people who did not declare foreign income.

7. How does the government find out about hidden income?
The I-T department uses data analytics, bank transaction records, and international tax information exchanges to detect discrepancies in income and spending.

8. What should I do if I receive such a notice?
If you receive a notice, consult a tax professional and provide the necessary details to the department to avoid penalties.

9. Will this affect everyone or just high-income individuals?
Right now, this scrutiny is mainly for high-income individuals whose declared spending seems suspiciously low.

10. What is the government trying to achieve with this?
The goal is to prevent tax evasion and ensure that individuals pay taxes on their actual earnings, including any hidden cash income.

DISCLAIMER
Airfinac.com, its author/writer and associates do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.