Individual taxpayers need not declare high-value transactions

Source: - The Economic Times

MUMBAI: The Central Board of Direct Taxes (CBDT) has given a breather to individual tax payers from declaring high-value transactions with banks, mutual funds, credit cards, etc via the income tax return forms. The newly notified income tax return forms for the Assessment Year 2011-12 - including Sahaj, Sugam, ITR 2, ITR 3 - do not carry the dreaded Annual Information Return (AIR) blocks.

"We have dispensed the individual taxpayers from declaring it in their return," said a CBDT spokesperson when asked about the missing AIR fields in the form. In the Annual Information Return requires a person to declare investments above Rs 2 lakh into mutual funds, Rs 5 lakh and above in company bonds, debentures or in RBI Bonds and Rs 1 lakh or more in shares of a company. Also, cash deposits worth Rs 10 lakh in banks, payments of Rs 2 lakh or more for credit card bills and Rs 30 lakh or more in immovable property transactions too were to be notified. Earlier, the information submitted by the individual taxpayer and the institutions were matched. "If the AIR is missing from the individual's forms then that would be a reason to take up the return for scrutiny," said the CBDT spokesperson .

Sunil Talati, former president of the Institute of Chartered Accountants in India, said, "This certainly brings relief to millions of tax payers. The details required were cross verifiable and if some honest or genuine mistakes were occurring in giving these details, then assessing officers were causing avoidable problems to such assesses. All these will be now avoided and tax payers will be not harassed or give explanations." "However, AIR continues to be in the statute book. We are still getting the information from institutions and the assessing officer has the annual information return while he is looking at a taxpayers return," said the spokesperson. "AIR provide a wealth of information to the tax department.

In the tax returns one had to provide only that information that was reported under AIR (by the institutions such as banks, mutual funds, credit card companies)," said Ameet Patel , tax partner, Sudit K Parekh & Co. The aggregate of transactions at one particular institution are reported if they exceed the stipulated limit. "So, if you invest Rs 20,000 with a mutual fund once and then later invest 1.9 lakh with the same mutual fund company in the same financial year, then the mutual fund will report your investments that exceed Rs 2 lakh. However, if you invest the first Rs 20,000 with one mutual fund and another Rs 1.9 lakh with another mutual fund then it will not be reported and the taxpayer too was not supposed to report it in his tax returns," added Patel.

The department has made a special arrangement with National Securities Depository Ltd ( NSDL )) wherein companies issuing shares or bonds, banks, credit card companies, mutual fund houses, Reserve Bank of India, registrars and subregistrars for property transactions can file the annual information return either physically or online. These institutions notify the high value transactions an individual has entered into with them. "Transaction details will be available to department. So on selective basis I Tax officers can verify or select the cases for scrutiny and the purpose will be served and results can be achieved," said Talati.