Bailabel Type : bailable

Description

Section 285BA of the Income Tax Act, 1961 imposes an obligation on certain persons or entities to furnish a statement of financial transactions or reportable accounts to the Income Tax Department. This provision is part of the effort to improve transparency in financial transactions and to ensure that reporting entities disclose key financial information, which can help prevent tax evasion and improve the accuracy of income tax assessments.

The section is mainly related to the filing of Form 61A or Form 61B, which are used to report specific types of financial transactions and reportable accounts that meet certain thresholds.

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Key Provisions of Section 285BA:

1. Obligation to Furnish Financial Transactions Statement:

• Under Section 285BA, certain persons/entities are required to furnish a statement to the Income Tax Department about certain financial transactions that meet specified criteria. These transactions include large deposits, high-value transactions, or specific types of accounts that are deemed to be of interest for tax purposes.

  These statements help the tax authorities track high-value transactions that may not be reported by the taxpayer and could indicate tax evasion or underreporting of income.

2. Types of Entities Obligated to Report:

• The entities and persons required to report under this section are:
  • Banks: Including branches of banks, who report transactions such as deposits or withdrawals exceeding a certain amount.
  • Financial Institutions: Such as NBFCs (Non-Banking Financial Companies), insurance companies, and others.
  • Mutual Funds: Reporting any transactions involving large amounts in mutual funds.
  • Post Offices: Reporting specified transactions.
  • Chartered Accountants and tax professionals: In cases where they facilitate large transactions for their clients.
  • Other specified persons: Such as those involved in trading, including exchanges, stockbrokers, and entities involved in real estate transactions.

3. Types of Reportable Transactions:

• The statement requires the disclosure of specified financial transactions and reportable accounts, which include:
  • Cash deposits or withdrawals exceeding a certain limit.
  • Investments in securities or mutual funds above a certain threshold.
  • Purchases and sales of immovable properties above a specified limit.
  • Loans and borrowings that exceed certain amounts.
  • Foreign remittances and international financial transactions.
  • High-value transactions in securities, including trading of stocks or bonds exceeding a prescribed limit.
  These transactions need to be disclosed even if the taxpayer has not reported the income derived from them.

4. Timeframe and Format for Filing the Statement:

• The statement of financial transactions or reportable accounts must be filed annually by the person or entity obligated to do so.

• The statement is required to be filed in Form 61A (for financial transactions) or Form 61B (for reportable accounts) within the prescribed timeframe, which is typically within 30 days from the end of the financial year.

  Failure to submit the required statement within the specified timeframe may lead to penalties.

5. Penalties for Non-Compliance:

• Penalties are imposed for failing to file the statement or for submitting false information in the statement:
  • Penalty for Failure to Furnish Statement: A penalty of up to Rs. 500 per day can be imposed for each day of delay.
  • Penalty for Furnishing Inaccurate Information: A penalty of up to Rs. 50,000 can be imposed for providing inaccurate or false details in the statement.

6. Role of the Tax Department:

• The Income Tax Department uses the information provided in the statements to track large financial transactions that could potentially lead to tax evasion. The department matches the data received with the returns filed by taxpayers to verify whether the correct amount of tax is being paid.
• The information collected is also used for data analytics and to identify tax risk areas, which could lead to investigations or scrutiny of taxpayers who fail to report substantial financial transactions.

7. Reportable Accounts:

• A reportable account refers to an account in a financial institution that holds substantial deposits, has foreign connections, or meets other criteria set by the tax authorities.
• The requirement for financial institutions to report certain accounts, especially those involving foreign assets or accounts in jurisdictions with lax financial regulations, is designed to prevent tax evasion through offshore accounts.

Punishment

• Penalty for Non-Submission:
  • Rs. 500 per day for failure to submit the statement of financial transactions or reportable accounts.
• Penalty for Incorrect Information:
  • Rs. 50,000 for submitting inaccurate or incomplete information in the statement.

These penalties are designed to ensure that all reportable transactions are disclosed promptly and accurately to avoid potential tax evasion.