New Income Tax Reporting Norms from April: 10 Things to Know
January, 07th 2016
To curb the menace of black money, the Income Tax department has notified new rules under which high-value transactions by individuals beyond a certain threshold will have to be reported by banks, property registrar and other agencies. Under the new norms, cash receipts/withdrawal, purchase of shares, mutual funds, immovable property and term deposits, and sale of foreign currency beyond a certain limit will have to be reported by the financial institutions to the tax authorities in a new format. The new reporting norms will be effective from April 1, 2016.
Here is a 10-point cheat-sheet
1) According to the new norms, the property registrar will have to report to income tax authorities any sale or purchase of any immovable property of value exceeding Rs 30 lakh.
2) Banks will have to report cash deposits of Rs 10 lakh or more in a financial year. The same limit will apply for term deposits (excluding renewal deposits) with a bank. In case of current account, the limit is Rs 50 lakh for a financial year.
3) If a person makes a credit card payment of Rs 1 lakh or more in cash or Rs 10 lakh or more in any other mode in a financial year, the credit card issuer has to report it to the tax authorities. The notification has also laid down the reporting norms for cash payment of Rs 10 lakh or more in a financial year for purchase of bank drafts or pre-paid instruments issued by the Reserve Bank of India.
4) Experts say that through these new reporting norms the tax department will be able to verify the tax return filed by the individuals with details it has got from these agencies where PAN is quoted. "Increasing the tax base by catching the tax evader is the primary reason for bringing in these rules," says Tapati Ghosh, partner at Deloitte Haskins & Sells.
5) The notification says "receipt from any person for sale of foreign currency including any credit of such currency to foreign exchange card or expense in such currency through a debit or credit card or through issue of travellers cheque or draft of an amount aggregating to Rs 10 lakh or more during a financial year" will have to be reported to the tax authorities.
6) Under the new norms, the financial institutions have to report the details of high value transactions to the tax authorities online in a prescribed format. The tax department has introduced a new form - Form 61A - in this regard.
7) The Form 61A will have to be furnished to the Joint Director of Income Tax (Intelligence and Criminal Investigation) online using digital signature, on or before May 31 immediately following the financial year in which the transaction is recorded.
8) The financial institutions have to keep the records of these high value transactions for six years. "Keeping the records for six years means that there can be audits to check the genuineness of the transactions," says Vineet Agarwal, partner at KPMG.
9) A company or institution issuing bonds or debentures or shares will have to comply with the new norm if the aggregate receipt from a person in year amounts to Rs 10 lakh or more in a year. For mutual fund houses, the limit is also Rs 10 lakh and above.
10) The financial institutions will have to verify the PAN details provided by the person. In case a person doesn't provide a PAN number, the financial institution will have to be take a declaration in a different format which require other identification details.