High-Value Transactions: A Guide for NRIs

Introduction

If you're a Non-Resident Indian (NRI) and believe you only need to file an income tax return in India when your income exceeds ?2.5 lakh per year, there's something important you might be overlooking. The Indian tax system not only considers your income but also keeps an eye on specific "high-value transactions" that both NRIs and residents are required to report.

Even if your income is below the taxable limit, engaging in these high-value transactions can trigger a tax notice if you don’t report them. Understanding these transactions and how to stay compliant is crucial.

Filing a tax return or completing compliance on the income tax portal isn't just about avoiding fines—it's about ensuring you don’t get stuck in lengthy scrutiny processes that can cost time and money. Let’s go over what you need to know.

What is a High-Value Transaction?

A high-value transaction is any financial activity, such as an investment, expense, or cash deposit, that crosses a threshold set by the Income Tax Department of India. When you exceed these limits, the transaction gets flagged, and you must report it or explain the source of the funds.

This is especially relevant for NRIs who may not realize that even routine transactions could be flagged for scrutiny.

Let's look at the common types of high-value transactions and how you can avoid any issues.

1. Buying Property

We know that selling property requires filing an income tax return due to tax deduction at source (TDS) and capital gains. However, even buying property can be considered a high-value transaction. If the property you purchase is worth more than ?30 lakh, you're required to report it on the compliance portal.

This might surprise some NRIs, especially those buying property as an investment or a family home, without much income in India.

2. Paying Credit Card Bills

Using credit cards is convenient, but large payments can come with tax obligations. If you pay more than ?1 lakh in cash toward your credit card bill in a year, you must report it. The threshold is higher for bank payments—?10 lakh per year.

Even if your credit card expenses are abroad, as long as you make payments through Indian banks, this rule applies. Failing to report large credit card payments could lead to an inquiry from the tax department, asking you to explain the source of your funds.

3. Investing in Stocks and Bonds

If you invest more than ?10 lakh in stocks, mutual funds, debentures, or bonds in a year, it is flagged as a high-value transaction. This applies whether these investments are short-term or long-term.

Many NRIs mistakenly believe that, since it's an investment, it doesn’t need to be reported. But this isn't the case—you still need to report it.

4. Depositing Cash in Bank Accounts

Depositing large amounts of cash, especially in real estate transactions, can be common practice. However, depositing over ?10 lakh in cash into any bank account in a year will automatically be flagged by the Income Tax Department. You’ll need to explain where the money came from.

For NRIs who may not keep a close eye on their Indian bank accounts, this can quickly become an issue. For instance, if you sold property and received part of the payment in cash, you'll need to report the deposit to avoid any suspicion of unreported income.

5. Buying and Selling Foreign Currency

As an NRI, dealing in foreign currency is often part of everyday life. However, if your foreign currency transactions exceed ?10 lakh in a year, they are considered high-value transactions.

Whether you're buying or selling, once you cross this limit, you’ll need to comply. The tax department closely monitors these transactions due to concerns about money laundering and tax evasion.

6. Business Cash Transactions

If you're running a business in India, large cash transactions in current accounts also count as high-value transactions. If you deposit or withdraw more than ?50 lakh in cash in a year, you’ll have to explain the source of the funds.

This rule helps keep unaccounted cash out of the economy but can lead to scrutiny if not reported correctly.

7. Paying Electricity Bills

Even paying your electricity bill can raise a red flag. If your annual electricity bill exceeds ?1 lakh, it is considered a high-value transaction. NRIs who own property in India but live abroad may not even realize they’ve crossed this threshold.

Why Is Reporting High-Value Transactions So Important?

Now that you know what qualifies as a high-value transaction, let’s talk about why reporting them is crucial.

Many NRIs mistakenly think that, since these transactions don't involve direct income, there's no need to report them. This isn't true. Failing to comply could lead to the tax department sending you notices, asking for explanations. Ignoring those notices can result in full-blown scrutiny, which requires detailed documentation about your finances.

Scrutiny can be time-consuming and expensive, especially if you need tax professionals or legal help to resolve the issue. Even transactions from years ago could come back to cause problems if they weren’t reported.

How to Avoid Tax Troubles

Here’s some good news—you can avoid most of these problems with a little planning. If you're an NRI who can’t regularly monitor your finances in India, you can use services that help you stay compliant.

We offer an automated system that syncs with the income tax portal. You can securely store your PAN number and password, and we’ll check for any compliance notices or issues on a weekly basis. If you need to take action on a high-value transaction, we’ll notify you immediately.

This way, you won't miss deadlines or overlook important compliance steps. You can choose to handle the compliance yourself or let us take care of it for you.

Conclusion

High-value transactions aren’t just for the ultra-wealthy. They can be triggered by everyday activities like buying property, paying large credit card bills, or making big investments. Whether you’re an NRI or living in India, it’s important to stay on top of your tax compliance.