[dropcap]T[/dropcap]he income tax department had notified the launch of pre-filled returns for ease and accuracy of filing.
To facilitate this process, CBDT issued a circular on March 12, 2021, authorizing various entities to report such transactions to the income tax department. These specified entities will be responsible for providing the details of capital gains transactions, dividends, and interest income of the taxpayers.
Currently, section 285BA of Income-tax Act 1961 governs the reporting of some specified financial transactions (SFT) by specified entities to the income tax authority. The section provides a list of transactions, their nature, and the threshold limit of a transaction pertaining to a particular taxpayer, beyond which the transacting entity shall have to report its details to the income tax authorities.
Reported transactions
Some of the examples of ‘specified transactions’ that are reported to the income tax authorities include, a cash deposit of more than Rs 10 lakh other than in current and fixed deposits, fresh fixed deposits of more than Rs 10 lakh, credit card payment above Rs 10 lakh, purchase of bonds, debentures, mutual funds or stocks of more than Rs 10 lakh, purchase or sale of immovable property of more than Rs 30 lakh, etc.
The section covers an exhaustive list of many more such transactions under section 285BA that are required to be reported. Specified entities such as NBFCs, banks, credit card issuing companies, post offices, a company issuing bonds, shares, or debentures shall have to report such transactions.
The reporting helps the income-tax department track any high-value transactions of the taxpayers and can be useful as an audit trail for suspicious transactions if any.
The new circular shall further the scope of reporting, by including transactions relating to capital gains of listed securities or mutual fund units, dividend income, and interest income earned. The circular has authorized the following entities to report the related transactions:
[tie_list type=”thumbup”]- Recognised stock exchanges, depositories, registrar and share transfer agents and recognized corporations for reporting capital gains on equities and mutual funds;
- Declaring companies to report dividend income;
- Interest income to be reported by banks, NBFCs, and post offices.
Please note that there is no ceiling limit for reporting these transactions as they will be used for providing pre-filled ITR to all filers of income tax returns.
The reporting will have to be done by the specified entities in the intervals that shall communicate through further notice. At present, these appointed entities are required to report SFTs of their clients on or before May 31 of the assessment year.
Though this will simplify ITR filing, individuals will have to remain vigilant for accurate reporting, as the income tax department will have the repository of such transactions of all tax filers.
It is advisable to cross-check the pre-filled details with various documents such as bank statements, Form 26AS, interest certificate issued, etc. while filing income tax returns to avoid any errors.
