During the last few years, the government has seen a strong and steady increase in direct income tax collections. For instance, in the ongoing financial year till January, India’s net direct tax collections grew by 8.82 percent to over Rs 18.38 lakh crore.
According to the government, the increase has been driven by steady corporate tax receipts and strong contributions from individual taxpayers.
Also, the number of income tax returns has increased significantly. While close to 7 crore ITRs were filed in 2021-22, the number swelled to over 9.2 crore in 2024-25.
The reason more and more people are coming under the tax net is that the government has digitalised various processes. This allows the government to easily track large transactions.
The Statement of Financial Transaction (SFT) is one such tool that the government uses to identify people and entities required to pay taxes.
There are about 16 kinds of large transactions that are difficult to hide from the tax authorities, including withdrawal or deposit of cash, sale of immovable property, time deposits, large cash payments, buyback of shares, etc.
Some of the major transactions that can be tracked under the SFT mechanism are cash payment for purchase of bank drafts of more than Rs 10 lakh in a financial year; cash payment for purchase of prepaid instruments issued by RBI of more than Rs 10 lakh in a financial year; cash deposits in one or more current accounts of a person with an aggregate amount of Rs 50 lakh or more in a financial year.
Other important transactions include purchase or sale of immovable property with a transaction value or stamp valuation of Rs 30 lakh or more; expenditure in foreign currency of more than Rs 10 lakh using debit/credit card, traveller’s cheque, draft or any other instrument.
While making these transactions, even if the person does not report them to the income tax department, the government gets to know about the transaction through the bank or other relevant authority.
