Income Tax Department Tightens Watch on Spending to Prevent Tax Evasion

The Income Tax (I-T) department is closely monitoring how people spend their money to catch tax evaders. It has started sending notices to those who report high incomes but withdraw very little money from their bank accounts. This raises suspicions that they might have undeclared income or be dealing in large cash transactions.

Detailed Expense Information Needed

People receiving these notices must explain their monthly expenses, including spending on:

• Groceries and gas
• Education and school fees
• Dining out and personal care (like haircuts and cosmetics)

The department is focusing on individuals whose spending does not match their declared income.

Family and Income Details Required

Besides expenses, individuals must also provide:

• Details of family members
• PAN numbers
• Annual income of each family member

If they fail to respond, the I-T department may assume they withdrew ₹1 crore in cash during the year.

Targeting High-Income Individuals

The department is mainly tracking High Net-Worth Individuals (HNIs) who live a lavish lifestyle but show low expenses in their financial records. This follows a similar crackdown in November 2023, when authorities investigated undeclared foreign income based on international tax data.

Government’s Data-Driven Approach

With the help of advanced data analysis, the I-T department is improving its tax monitoring efforts. This move highlights the importance of keeping clear financial records and declaring all sources of income to avoid penalties.