New Delhi, July 23 -- Many taxpayers believe that cash deposits below Rs.10 lakh in a financial year are outside the Income Tax Department's radar. This assumption stems from Rule 114E of the Income-tax Rules, 1962, which requires banks, co-operative banks and post offices to report cash deposits aggregating to Rs.10 lakh or more in savings accounts during a financial year through the Statement of Financial Transactions (SFT).

However, the Rs.10 lakh figure is a reporting threshold for specified financial institutions. The Income-tax Act separately empowers the tax department to seek information or examine transactions where necessary under various provisions of the law.

The Income Tax Department also receives financial information from...