You could receive a tax notice even if 60,000 is credited to your account; be aware of these rules..

Income Tax Notice: Many people assume that the Income Tax Department only monitors transactions involving large sums—running into lakhs or crores. In reality, however, the situation is quite different. If even as little as ₹60,000 is credited to your bank account and you are unable to explain its source, you could receive an income tax notice at your doorstep.

Under Section 102 of the Income Tax Act, 2025, the department has the full authority to question any unexplained funds credited to an account. According to CA Parag Jain, Tax Head at ‘1 Finance’, just as a transaction of ₹6 lakh might trigger an inquiry, a transaction of ₹60,000 could also lead to questioning. Whether an amount is small or large is not the sole criterion for determining whether the department will seek an explanation from you.

This rule can be understood through a simple example. Suppose an employed individual has an annual income of ₹12 lakh, which they have duly reported to the government. However, over the course of the year, a total of ₹40 lakh is deposited into their bank account from various sources—perhaps sent by friends, relatives, or as payment for services rendered.

While receiving a large sum via UPI does not automatically trigger a notice—and not every inflow is necessarily taxable—the department may demand an account of the funds if the total amount credited exceeds the individual's reported income. Income tax laws do not specify an annual limit for UPI transactions; the key factor is whether the account holder can provide a valid justification for the source of the funds.

How do the rules for digital/mobile transactions differ from those for cash deposits?

There is a common misconception that the Income Tax Department is automatically notified the moment UPI transactions exceed a certain threshold. Parag Jain clarifies that no such rule exists. According to the rules for the Statement of Financial Transaction (SFT), if cash deposits in a savings account reach ₹10 lakh, or ₹50 lakh in a current account within a single year, the bank is required to report this.

These cash deposit limits do not apply to digital transactions made via UPI, NEFT, RTGS, or IMPS. Similarly, the limit on transferring ₹1 lakh at a time via mobile-based payment methods is a policy set by banks and the NPCI; it has no connection to income tax regulations. However, if the Income Tax Department audits an individual's account, they examine the entire bank statement. If the funds in the account exceed the reported income, the account holder must provide an explanation for each transaction.

Money received in exchange for work or services is considered 'earnings.'

For those who regularly receive payments via mobile, tax implications depend on the reason for the receipt. If you receive money in exchange for work or services, it is classified as your earnings. Conversely, money collected from a friend to split a restaurant bill is not considered earnings. Problems arise when individuals mix personal household expenses with business or professional transactions in the same bank account.

A case of this nature emerged in Karnataka in 2025, where over 13,000 small shopkeepers received GST notices based on the funds they had received via UPI. Many of these shopkeepers had accepted payments on behalf of others, which caused their account activity to appear significantly higher than their actual business turnover. In Haveri, for instance, a vegetable vendor received a notice for ₹29 lakh—even though the sale of vegetables is exempt from GST. Parag Jain advises that tutors, freelancers, and small shop owners should maintain a separate bank account for their professional earnings. Additionally, they should issue formal invoices for all services or sales, ensuring a clear distinction between personal funds and business income.

Receiving funds from others and transferring them onward can lead to trouble.

Often, people collect money from friends into their own accounts to make a group purchase. In other instances, at the request of a relative, someone might receive funds into their account only to forward them to a third party. Even if your intentions are honest, the frequent receipt of funds followed by immediate outward transfers can land you in serious trouble. Parag Jain warns that such transactions resemble those associated with "money mule" accounts. Criminals frequently use such accounts to move illicit funds—derived from fraud or scams—which is why banks and investigative agencies keep a close watch on them.

From the perspective of the tax department, simply forwarding the money to someone else does not absolve you; the department may still question why the funds were deposited into your account in the first place. While such transactions alone do not prove criminal intent—as any legal action would be based on concrete evidence—it is still prudent to maintain written records: who sent the money, why it was sent, and to whom it was subsequently transferred. Anyone who handles transactions—especially those conducted via digital/mobile channels—should keep a meticulous account, clearly distinguishing between the total funds received and their own actual earnings.

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