High Value Transactions – Income Tax Reporting required or not?
Are you concerned about how to file income tax return and additional & detailed disclosure of information to Income Tax (IT) Department haunts you? Relax, there is good news for all of you!
The Income Tax Department has come up with the clarification that provides great relief to the taxpayers. It has been clarified that the taxpayers are not required to provide details & disclose high-value transactions in their income tax return.
Income Tax Officials clarified that only third parties are required to report high-value transactions to the income tax department as per the Income Tax Act. As per the latest development around this, it is further clarified that there is no proposal to change the income tax returns forms.
The IT Department already receives information from “specified persons” like banks, mutual funds, institutions issuing bonds and registrars or sub-registrars regarding individuals having high-value financial transactions since the financial year 2016 onwards and since, the taxation is moving towards a faceless approach, therefore broadening the scope of reporting financial transactions by third parties has become important than ever.
The purpose of this reporting is to identify those who spend big money on business class air travel, foreign travel and expensive hotels or send their children to expensive schools, but do not pay taxes by claiming their income to be under Rs. 2.5 lakhs p.a. and to take necessary actions against them so that they file the income tax returns and pay the taxes due.
The IT Department rely more and more on voluntary compliance and therefore considers that data collected from third parties through Statement of Financial Transaction (SFT) as the best and the most effective non-intrusive method to catch evaders.
Prime Minister, Shri Narendra Modi, at various public events have asked people to pay their fair share of taxes, given that the country’s tax base is relatively small. Also, it is a well-known fact that, in India, only a tiny segment of people pay taxes and all those who should be paying their taxes are actually not paying their taxes, therefore, going forward, it would be interesting to note how helpful this measure will be in order to help the government in increasing its tax collection.