Income tax: Cash deposit limit in mutual funds to avoid I-T notice

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The income tax department of India is highly vigilant against high value cash transactions. They have developed such a unique system that even when we don’t report about our cash transaction, they would fish out the transaction details from the balance sheet of the institution with which we have done the cash transaction. For example, suppose we made bank demand draft using cash and deposited that in our mutual fund scheme, then the income tax officials will get this information by mutual fund house balance sheet. So, it’s advisable to know one’s cash transaction limit allowed while investing in mutual funds or any other investment scheme.

Speaking on the cash transaction limit that don’t attract income tax notice Mumbai-based tax and investment expert Balwant Jain said, “If an investor deposits cash to the tune of 10 lakh or above in mutual funds in a particular financial year, then income tax department may send notice to the investor. So, it’s better to contain one’s cash transactions while investing in mutual funds.”

Standing in sync with Balwant Jain’s views; SEBI registered tax and investment expert Jitendra Solanki said, “One should try not cross the 10 lakh limit in mutual funds and equity investment as going beyond this limit (both cash and digital payment) attracts attention of income tax officials. However, if the income tax return (ITR) of the investor allows investment up to this limit then investing beyond 10 lakh in mutual funds and equity is advisable through digital payments.” He advised equity and mutual fund investors to avoid cash transaction beyond 10 lakh in single financial year.

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