Last reviewed: 13 November 2026. Banks, registrars, mutual funds, companies and card issuers report high-value transactions to the department through Statements of Financial Transactions (SFT). These appear in your Annual Information Statement (AIS). When they do not fit the income in your return, or you have not filed one, the department writes to you, usually through the Compliance Portal before any formal proceeding. A clear response at this stage often closes the issue without a reassessment.
Part of our income-tax notice series. For every notice type, the time limits and the appeal route, start with the complete guide to income-tax notices.
Transactions that commonly trigger these letters
| Transaction | Reported when (broadly) |
|---|---|
| Cash deposits in savings accounts | ₹10 lakh or more in a financial year across accounts of one person |
| Cash deposits or withdrawals in current accounts | ₹50 lakh or more in a financial year |
| Time deposits | ₹10 lakh or more in a financial year (other than renewals) |
| Credit card bills | Cash payment of ₹1 lakh or more, or total payments of ₹10 lakh or more |
| Purchase or sale of immovable property | Value of ₹30 lakh or more, reported by the sub-registrar |
| Shares, mutual funds, bonds, debentures | Investments of ₹10 lakh or more in a financial year; demat and mutual fund transaction reporting extended in 2026 (see SFT-2517 and 2518) |
| Foreign travel and foreign remittances | Large forex purchases and outward remittances under LRS |
Thresholds are those in rule 114E, as amended; check the current rule for the year in question.
Kinds of communication
- e-Campaign letters and SMS asking you to review AIS and file or revise a return.
- Non-filing cases, where transactions exist but no return was filed for the year.
- e-Verification under the e-Verification Scheme, 2021, asking you to confirm or explain specific information.
- If unresolved, a section 148A notice for a past year, or a section 142(1) notice to file the return.
How to respond
- Download AIS and check every item flagged. Mark items that are wrong, duplicated or belong to someone else, and give feedback.
- For genuine transactions, explain the source: salary savings, sale of a property, loan from a relative, agricultural income, gifts with documents.
- If income was missed, file an updated return (ITR-U) where the time allows, paying the additional tax, rather than waiting for a reassessment.
- If the transaction is already covered in a return, give the acknowledgement number and the schedule where it appears.
- Keep the documents ready; the same explanation will be needed if a reassessment follows.
Cash deposits: the evidence that works
For cash deposits, the explanation must show where the cash came from and why it was held in cash: withdrawal records, sale bills, cash books for businesses, or confirmations for gifts and loans. Unexplained cash is taxed under section 115BBE at a high special rate with no deductions, so the explanation needs to be documented. Our analysis of what courts accept for cash deposit additions covers the case law. For business cash handling limits, see cash transaction limits and penalties.
Illustrative example
A retired person who does not file returns because income is below the limit receives a non-filing letter showing a property sale of ₹62,00,000 in FY 2024-25. The sale produced long-term capital gains, which made a return necessary for that year. An updated return is filed with the capital gains computation, indexation where available under the rules for that sale, and the reinvestment in a residential house under section 54, so that the tax payable works out low, and the compliance portal response gives the ITR-U acknowledgement.
Frequently asked questions
Why did I get an income-tax notice for cash deposits?
Banks report cash deposits above the SFT thresholds, for example ₹10 lakh or more in savings accounts in a year. If the deposits do not fit the income in your return, or no return was filed, the department asks you to explain the source.
What is the Compliance Portal?
It is a section of the e-filing portal where e-campaigns, e-verification and non-filing cases are shown. You respond there by confirming, explaining or disputing each item of information.
What if AIS shows a transaction that is not mine?
Give feedback on AIS marking the information as incorrect or relating to another person, and respond on the compliance portal with the explanation. Keep any proof, such as a bank letter.
Can I file an updated return after receiving a non-filing letter?
Generally yes, if the time for an updated return is still open and no assessment or reassessment proceeding is pending for that year. Filing one with the additional tax is usually better than waiting for a reassessment.
What tax applies to unexplained cash?
Income treated as unexplained under sections 68 to 69D is taxed under section 115BBE at a special high rate without any deduction. A documented explanation of the source is therefore important.
We read the notice against your return, AIS and books, tell you what it is really asking, prepare the reply with supporting documents, file it on the portal and follow the matter through to the order and, where needed, appeal. The outcome rests with the tax authority; our work is to put a complete, documented response before it.
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This article is for general information and does not constitute advice on any specific case. Sources: the Income-tax Act, 1961 (which continues to govern assessment years up to 2026-27 under section 536 of the Income-tax Act, 2025), the Income-tax Act, 2025, the Finance Act, 2026 and the CBDT instructions and circulars cited in the text. Time limits run from the date of service of each notice or order; confirm the current position and the exact dates in your notice before acting. Firm details: Somesh Chandak & Associates, Chartered Accountants, Unit 119, 1st Floor, Centura Square IT Park, SG Barve Road, Wagle Estate, Thane West 400604. FRN 158694W.