Section 285BA of the Income Tax Act, 1961, and Rule 114E require “specified reporting person" to furnish a statement of financial transaction. According to the notification issued on Tuesday, banks will have to report the details of all those taxpayers whose interest income across deposits exceeds ₹5,000 in a fiscal year.

For companies there is no minimum limit. They will have to report details of the dividend paid to every shareholder. In March, the tax department issued a circular directing a few entities including banks, companies and brokers to report the interest, dividend, and capital gains earned by investors to the tax department every year.

The purpose of this is to enable the tax department to provide pre-filled information in the tax forms to the taxpayers. In the Union Budget 2021-22, the finance minister announced that taxpayers will get information related to capital gains and dividend pre-filled in their tax forms.

The guidelines will help in uniform reporting by the entities. “Reporting entities are required to prepare the data file in prescribed format from their internal system.The statement of financial transactions shall be furnished on or before 31 May, immediately following the financial year in which the transaction is registered or recorded," said the notification.

“The statement shall be signed, verified, and furnished by the specified designation director of the bank," it added.

The banks will report the interest income earned by the account holder across the bank accounts, including, savings account, recurring account, and fixed deposits. However, interest earned on Public Provident Fund (PPF), foreign currency non-resident account, resident foreign currency account, and Sukanya Sumriddhi account is not required to be reported.

Banks will have to report the gross amount. They can’t give the deduction of ₹10,000 under Section 80TTA. The taxpayer can claim the deduction by filing the income tax return (ITR).