There are numerous salaried persons, who invest in stocks or even do day-to-day trading but never ever reveal the facts connected to capital achieve / loss in their Income Tax Return (ITR). The motive of not revealing the capital achieve/loss in their return of revenue may well be due to sheer ignorance, avoiding difficulty of calculating the gains / losses, worry of filing more difficult ITR type than the ITR-1 or to suppress the facts to prevent paying larger tax.
The taxpayers had been in a position to take the benefit so far, for the reason that the Income Tax Department used to get facts connected to just revenue from salary, interest on bank fixed deposit (Bank FD) and taxes paid from the respective sources, which had been revealed in Form 26AS.
But now on, the Department will also get facts connected to capital gains / losses, dividend revenue as properly as interest on Post Office deposits and deposits in Non Banking Financial Companies (NBFCs), which will be revealed in the new format of Form 26AS.
This will enable the ignorant taxpayers contain such information in their ITRs, when creating it hard for tax evaders to suppress these information.
“Currently, the Income Tax return forms enables the taxpayers to auto populate details such as Personal Details including Name, PAN, Address, Bank Details, Tax payment and TDS details, etc. In the Budget 2021 proposals, the Finance Minister announced the pre-filling of Income Tax returns with respect to the details of capital gains from listed securities, dividend income, and interest from banks, post office, etc. for the purpose of easing the procedure of return filing,” stated Dr. Suresh Surana, founder, RSM India.
“In accordance with the same, the CBDT issued Notification No. 16/2021 dated 12th March 2021 wherein they provided that a specified category of persons required to furnish a statement of financial transaction u/s 285BA of the Income Tax Act, 1961 (hereinafter referred to as ‘the IT Act’) should include information pertaining to capital gains on transfer of listed securities or units of Mutual Funds, dividend income, and interest income,” he added.
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But how will the Income Tax Department get all the facts?
In accordance with the stated Notification, the category of persons expected to report such transactions are as follows:
Capital gains on transfer of listed securities or units of Mutual Funds
- Recognised Stock Exchange such as BSE, NSE, and so forth.
- Depository defined Depositories Act, 1996
- Recognised Clearing Corporation
- Registrar to an concern and share transfer agent registered beneath SEBI
Dividend Income
- Company distributing such dividend
Interest Income
- A banking business or a co-operative bank covered beneath the Banking Laws
- Post Master General defined beneath the Indian Post Office Act, 1898
- Non-banking economic business which holds a certificate of registration beneath the RBI Act, 1934
How will it have an effect on the taxpayers?
“The current provisions u/s 285BA of the IT Act already require companies issuing shares, trustees of mutual funds, etc to furnish the Statement of Financial Transaction for certain transactions in shares and mutual funds, etc. amounting to 10 lakh or more. As such, due to the broad coverage of data in the Annual Information Statement (AIS), the taxpayer needs to ensure that all details of income are appropriately considered while filing their tax returns. Due to the data analytics used by the Income tax department, any tax escapement by the taxpayer, either advertently or inadvertently, would be more closely scrutinised,” stated Dr. Surana.