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Is buying a car with cash invite Income Tax department?

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Is buying a car with cash invite Income Tax department?
By: Amit Bansal
July 2, 2018
  All Articles by: Amit Bansal       View Profile
  • Contents

Decided to buy a car, have you finalize the payment conditions?

That would be the tricky one, as far as income tax is the concern.

Now you are wondering:

Buyer is me, the seller is car dealer- why income tax is bothered.

In the article, you will get all your answers.

Buying a car with 100% cash payment attract income tax department.

This is true.

It raises a question to the income tax department about the source of money.

Points to remember while buying a car in cash

Logically, it is true when you buy a car in cash, definitely raise a question:

Where have you got the money from?

If you are an employee or a small shopkeeper.

  • Before going to buy a car remember, do you have filled your income tax return or not.
  • If you are a genuine taxpayer, are you preparing your books of accounts?
  • Last, is there surplus cash available in your books.

I am talking about the account of books:


You are wondering if you are individual a salaried employee, why books "I am not running a business"

A good question.

This example will explain it in details:

"If you are in possession of $ 1000, (for that you have already paid taxes),  you pay your rent $ 200, pay for your grocery $ 100, entertainment and fuel $ 200 and finally some of the miscellaneous expenditure $ 250.

Now you have left with $ 250, that would be your saving:

Or, you can saw you can use the balance money later.


If this principle repeats for 4 months in a row:

You have $ 1000 in your hand.

Now if you send whole $ 1000 in a single day, who can be Income tax department bothering you.

Some time income tax department unable to check your books or your income tax return and send you a notice

In one of the articles published in economic times " Now auto dealers asked to report transactions above ₹ 2 lakh"

Income tax department asks car dealers to report transaction above 2 Lakhs, just to keep an eye and find out those taxpayers who tread to cheat income tax department.

But you have already maintained your books, you have all the answer of every penny you earned and paid tax for it.

Don't panic with income tax return, Play with it.

Filling your income tax return not only keep you confident but also enhance your credit score.


By: Amit Bansal - July 2, 2018


Discussions to this article


Sir the news article attached is of 2016. Moreover from 1 April 2017 as per finance act 2017 new section 269 ST has been introduced as per which any transaction involving 2 lakh or more cash would be penalized equal to transaction amount. That is 100% penalty. So now no such transaction is possible. Now its not just matter of reporting or having cash in hand in books. Any such transaction attracts 100% penalty so should not be done.

By: Gopal Khandelia
Dated: 03/07/2018

Thank you, sir, for your guidance, but I have one question If I pay the amount through cheque, in that case too I am liable for tax..

By: Amit Bansal
Dated: 23/07/2018


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