AIR Income Tax Notice For Me ?

Not possible! My friend Natarajan reacted in disbelief when his wife informed him on phone. He had no reason to believe her. He immediately called me to know that what could be the reason. This is where I had to dig details to know what could be the reasons for which my friend Natarajan and the likes are served notices and are caught unawares.,You may be the one to face this situation to whom Income-Tax department has sent the notice about the investments you made in bonds/debentures/shares/mutual funds. You are further surprised that how the income tax department has come to know about it.,So for all you first timers, I would like to share with you that as  per the existing provisions under Income Tax Laws some entities are required to report the details of those transactions which you have entered into with them or have been registered with them. This way we see that such notices are  the result of the details furnished by those companies/mutual funds  whose shares, bonds and units etc. you have purchased directly from the Company.

Only a few amongst us know as to what type of information is furnished by these entities to the income tax department. It is in our interest to broadly know the nature of information that is furnished to the income tax department by these entities so that we can be forewarned about the consequences of such transactions.

Who is required to furnish these details?,The details which are required to be submitted are primarily in the nature of investments and expenses incurred by you. In this respect  all the Banks, Mutual Funds and Companies issuing shares through IPO/FPO are required to submit the details. Besides, Office of the Registrar where your sale and purchase transaction of immovable properties are registered is also required to send the details of such transactions to the income-tax department.

Let us understand the nature of informations collected by the income tax department from various sources. The information collected can be divided into the following categories for the purpose of quick and easy understanding.

Cash deposits in savings account:,The banking related transaction could be broadly divided into two parts. First category relates to transactions related with cash deposits in your saving bank account. As per the law prevalent in India all the banks are required to report details of all those saving accounts  where cash aggregating to Rs. 10 lacs or more has been deposited  during the financial year. The figure of Rs. 10 lacs is not for a single transaction but is aggregate of all the transactions during the financial year. So be careful and refrain from depositing cash in your bank account as you will have to explain such deposits in case the aggregate deposit of the amount during the financial year exceeds the threshold limit of Rs. 10 lacs. Generally people who indulge into heavy cash deposits in their saving bank account prefer to have their saving bank account with Cooperative banks. They are under the impression that the Cooperative banks are not required to report such transactions to the income tax department. But please know that Cooperative banks are also covered by this legal requirement and are required to report such transactions to the income tax department.,However let me make one thing clear. Banks are not required to report in cases where cash exceeding Rs. 10 lacs has been withdrawn from the saving account but the cash deposits have not crossed the threshold limit.

Expenses on credit cards:,The second category of banking related transaction is expenses incurred by you through,credit card,.  The bank or any person issuing any credit card is required to report the transaction of payments made by you for credit card if the aggregate of payments made by you during the financial year is Rs. 2 lacs  or more during the financial year.

Property purchase/sale transaction:In case you purchase or sell any immovable property, the transaction is required to be registered with the Office of Registrar. The office of Registrar is also required to report details of purchaser and seller of all the transactions where the value of the immovable property is Rs. 30 lacs or more. Please note that this provision covers transaction in respect of all the immovable properties so as to include transactions of agricultural lands, non-agricultural lands, residential house and residential flats etc.
Investment in shares/debentures/bonds/mutual funds:,In addition to transactions related to banks and purchases and sale of immovable properties, every time you make investment above specified limit the transaction needs to be reported to the income tax department. In this category of investments three types of  transactions are covered. First category covers investment made by you in shares and bonds/debentures of company and any other Corporation. The limit is only Rs. One lac in case the transaction relates to purchase of shares either through IPO or rights issue by a company.,There is different threshold limit of Rs. 5 lacs in case you have applied for debentures or bonds in the Company or the Corporation issuing the bonds/ debentures.,The second category of investment is applicable in case of purchase of units of a mutual funds where the limit is of Rs. Two lacs.

This  limit applies for all types of the  schemes of mutual funds and not necessarily the schemes related with equity investments. This reporting requirement does not apply in case of your dealing in  Exchange Traded Funds (ETF) of mutual funds as these are traded on the stock exchange and are not directly purchased from the mutual funds.

The third category of reporting requirement in respect of investment applies in case you have purchased any bonds issued by Reserve Bank  of India for a value of Rs. 5  lacs or more during a financial year.

All the above reporting is required in case you have purchased the shares, units, bonds and debentures directly from the company, mutual funds or Reserve Bank of India. However presently reporting is not required if you have purchased  shares, units, bonds and  debentures through broker of a stock exchange.

These reporting requirement are just not requires reporting transaction of individual tax payers but also covers company, partnership firms and  trust etc. also.,It is always advisable to be forewarned and forearmed in order to avoid any unpleasant situations.,Now that you know the nature of transactions reported to the Income Tax department as part of Annual Information Report, please watch out!

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