Can you get income tax notice for UPI, NEFT, RTGS or IMPS transactions? CA explains when your transactions may come under scrutiny

Many taxpayers worry that receiving or sending money through the Unified Payments Interface (UPI), National Electronic Funds Transfer (NEFT), Real Time Gross Settlement (RTGS) and Immediate Payment Service (IMPS) may also invite an income tax notice. With digital payments becoming the norm, such concerns are common, especially when large amounts are involved. However, according to chartered accountant Abhishek Soni, CEO & co-founder of Tax2win, the mode of payment itself is not what attracts the Income Tax Department's attention. Instead, what matters is whether your financial transactions are consistent with the income disclosed in your Income Tax Return (ITR). Soni explains situations when a taxpayer may receive an income tax notice.

No, simply using the UPI, NEFT, RTGS, or IMPS does not trigger an income tax notice. These are just payment methods. The Income Tax Department does not issue notices based on how you transfer or receive money.

The Income Tax Department looks at whether your transactions match the income you have reported in your Income Tax Return (ITR).

For example, you may receive a notice if:

You report a low income but your bank account shows large or frequent transactions.

You make high-value cash deposits without a valid source.

A notice may also be issued if:

You make high-value cash deposits without a valid source.

Your account receives regular UPI payments that appear to be business income, but you don't report them in your ITR.

Source of funds matters

You may also face scrutiny if you cannot explain the source of money received through the UPI, NEFT, RTGS, or IMPS.

Banks report certain high-value transactions, such as large cash deposits, to the Income Tax Department. However, this does not automatically result in a notice. If your transactions are genuine, properly documented, and consistent with the income reported in your ITR, there is generally no cause for concern.