In this Era of Latest Technology, it is not hard for the Income Tax Department to have a look on the Financial Non-Cash Transactions entered by anybody whether in India or Outside India.
CBDT has issued circular to various entities who let you do the financial transactions i.e. Financial Institutions such as Banks, NBFC’s, Post Offices to provide the details regarding Capital Gains transactions, interest and dividend income of the Tax Payers.
The Financial Transactions that will be reported by these entities to Income Tax Department are the transactions governed by section 285BA of Income Tax Act, 1961. This section provide some notified transactions with their nature and threshold limit related to a particular taxpayer.
By Issuing a Notification Dated: 12 March, 2021, Department of Income tax added another Transaction Code SFT – 016 which will lead more disclosure by the Banking Companies towards Income Tax Department regarding Saving Interest (as Fixed Deposit (FD) interest was already tracked by income tax department through FORM-26AS as TDS is being deducted on FD interest). Information will be reported by Banking Institution to Income tax department if any Person Receive Saving Interest in one or more bank accounts of Rs. 5000 or more in a F.Y.
Following are the “Specified Transactions” that are reported to income tax authorities by the specified entities in Case of Individuals (Transactions that will not affect Individuals are not mentioned in this article):
exchange card or expense in such currency through a debit or credit card or through issue of traveler cheque or draft or through any other instrument.
Although Interest which is exempt from tax such as Interest on PPF, FCNR etc will not be reported. Also while reporting the interest amount the deduction of Rs. 10000/- available under section 80TTA should be reduced from Interest amount Paid/ Credited.