From property deals to foreign assets: how the Income-Tax Department tracks your money
Feb 17, 2026
Synopsis
In December, the Income-tax Department sent SMS and email alerts flagging mismatches in reported income and non-disclosure of foreign assets. This article explains how such information reaches the tax system—through SFT filings, TDS/TCS data and global information-sharing frameworks—and what taxpayers should do to stay compliant in a data-driven tax regime.
Have you ever thought about how the tax department finds out about your bank deposits, spending habits, property deals or stock-market activities? India’s income-tax system has quietly transitioned from one that relied largely on what taxpayers declared to one that’s driven by data, algorithms and mandatory digital reporting from banks, financial institutions and market intermediaries.
From cash deposits to overseas investments, almost every major financial transaction is now automatically reported to the tax department.
What you see in your Annual Information Statement (AIS) or Form 26AS is only the surface. Underneath it all is a massive financial intelligence network that gathers transaction data, tax deduction records, registry information and international disclosures to build a nearly complete financial profile of every PAN holder. This digital trail increasingly determines whether your return passes smoothly—or triggers a query.
The backbone: Statement of Financial Transactions (SFT)
According to the Income-Tax law, thousands of entities must digitally report certain high-value transactions in a prescribed format. These include banks and co-operative banks, NBFCs and Nidhis, mutual funds, companies issuing shares or bonds, credit-card companies, property registrars, stock exchanges and depositories, post offices and foreign-exchange dealers.
This PAN-wise reporting creates a nationwide financial tracking network.
What gets reported in a financial year
• Cash paid for purchase of bank drafts, pay orders or banker’s cheques, or cash deposits in savings accounts Rs 10 lakh+.
• Cash deposits or withdrawals (including bearer cheques) in current accounts ₹50 lakh+
• Fixed or time deposits Rs 10 lakh+
• Credit-card payments Rs 1 lakh in cash or Rs 10 lakh otherwise
• Purchase of shares, bonds or debentures Rs 10 lakh+
• Buyback of shares by a company Rs 10 lakh+
• Mutual-fund investments Rs 10 lakh+
• Property purchase or sale (consideration or stamp-duty value) Rs 30 lakh+
• Cash sale of goods or services Rs 2 lakh+
• Foreign-currency purchases or expenses Rs 10 lakh+
Capital-market transactions: Now fully visible
To enable pre-filled capital gains, stock exchanges, depositories (NSDL and CDSL), clearing corporations and registrar & transfer agents are now mandated to report transactions in listed shares and mutual-fund units. This is why most share-market transactions now automatically appear in AIS.
Dividend and interest: Even small amounts reported
Companies, banks and financial institutions are required to report dividend and interest income irrespective of value. As a result, even small amounts reflect in AIS and the pre-filled ITR, even if no TDS has been deducted.
Your AIS is no longer just a tax statement—it is the digital mirror of your financial life. As reporting expands, more transactions are likely to fall within its scope.
TDS & TCS statements: Tracking what you earn
While SFT captures spending and investments, TDS statements track income on which tax has been deducted at source. Deductors are required to file:
• Form 24Q – For salary paid
• Form 26Q – For other payments, such as professional fees, interest and dividends
• Form 27Q – For payments to non-residents
In addition:
• Form 26QB tracks sale of immovable property (other than agricultural land) where consideration or stamp value exceeds ₹50 lakh
• Form 26QC tracks rent paid to resident landlords where monthly rent exceeds ₹50,000
• Form 26QD tracks certain contractual payments by individuals and HUFs
• Form 26QE tracks transactions in virtual digital assets, including cryptocurrencies
These statements contain the PAN, the amount paid, tax deducted and the nature of the income. The data flows into Form 26AS and AIS, which is why interest and dividends often appear in pre-filled returns even before filing begins.
Tracking high-end spending and foreign remittances
Quarterly TCS statements (Form 27EQ) track:
• Purchase of motor vehicles costing over ₹10 lakh
• Foreign remittances under the Liberalised Remittance Scheme (LRS) above ₹10 lakh (subject to exceptions)
• Overseas tour packages exceeding ₹10 lakh
These entries flow into AIS, making such transactions directly visible to the tax department.
Foreign assets and income
Through CRS, FATCA and DTAA exchanges, foreign financial institutions send data on overseas accounts, interest, dividends and securities sales. This information is matched with Schedule FA and FSI in the ITR and is also used for enforcement under the Black Money Act.
Project Insight: The analytical engine
All reported data is processed through Project Insight, the Income-tax Department’s advanced analytics platform. It cross-links spending, investments and asset purchases with income declared in the ITR to identify mismatches and inconsistencies.
For example:
1.If the property registration authority reports, through an SFT, the purchase of immovable property worth ₹2 crore by a taxpayer, but the income disclosed by the taxpayer in the ITR for the relevant assessment year is only ₹15 lakh, the system flags the case as the investment appears disproportionate to the reported income.
2.If, according to Form 26QB, TDS on the purchase of immovable property is deducted by the buyer on a stamp-duty value of ₹5 crore, but the seller reports actual sale consideration of ₹4 crore received from the buyer while computing capital gains in the ITR, the system may flag discrepancies in both cases.
For the seller, the stamp-duty value of ₹5 crore may be treated as the full value of consideration under Section 50C, indicating prima facie suppression of capital gains to the extent of ₹1 crore.
For the purchaser, the difference of ₹1 crore between the stamp-duty value and the actual consideration paid may become taxable as income from other sources under Section 56(2)(x).
Such mismatches can trigger:
• AIS alerts
• Risk-based scrutiny
• Notices under Sections 133(6), 148A or 148
Why checking AIS matters
Since AIS now drives automated alerts and scrutiny, taxpayers cannot afford to ignore it. Banks, mutual funds, registrars, stock exchanges and foreign institutions supply raw data, and mistakes happen—wrong PANs, reporting against both primary and secondary holders, duplicate entries or inflated values.
AIS feedback option can protect taxpayers from unnecessary notices.
Money leaves footprints
With inputs from banks, capital markets, property registries and foreign authorities, the Income-Tax Department now sees almost every major financial move. AIS is the taxpayer’s window into this system—showing reported transactions, triggering alerts and allowing corrections.
Today, tax compliance is no longer based primarily on what you declare, but on what the system already knows.
In today’s tax regime, money leaves footprints—and the data gathered by the Income-Tax Department ensures they are visible, verifiable and increasingly unavoidable.
What taxpayers should do
• Check AIS early, not at the last minute: Review your AIS preferably within one month from the end of each quarter to identify mismatches in time.
• Use the AIS feedback option: If any entry is incorrect, duplicated or wrongly attributed, submit feedback on the portal.
• Match AIS with your ITR: At the time of filing your return, ensure all income is correctly disclosed—even if a particular income item is not reflected in AIS.
• Don’t ignore alerts or emails: AIS messages and system-generated alerts act as early-warning signals. Addressing them promptly can help prevent scrutiny notices later.
• Disclose foreign assets carefully: Overseas accounts, investments and income must match the disclosures in Schedule FA and FSI. Non-reporting can trigger action under the Black Money Act.
• Keep supporting documents ready: Bank statements, contract notes, property papers and foreign account records help explain transactions if queries arise later.
Bottom line: In a data-driven tax system, compliance is no longer about what you report —it’s about whether your return matches what the system already knows.
The author O.P. Yadav is a former IRS officer with over 36 years of experience in tax administration, education, and training. The views expressed are personal.
[The Economic Times]
