New Delhi, Oct. 22 -- Depositing Rs.10 lakh in a savings account or transferring Rs.50 lakh to a family member does not automatically create an income tax liability. However, such transactions can attract scrutiny if taxpayers are unable to explain the source of funds or establish the nature of the transfer.

According to CA Parag Jain, Tax Head at 1 Finance, taxpayers must distinguish between transaction reporting requirements, restrictions on cash receipts and the taxation of gifts. These rules operate differently, and crossing a reporting threshold does not necessarily mean the money becomes taxable.

Under the Statement of Financial Transactions (SFT) framework, banks are required to report specified high-value cash deposits to the In...