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June 29, 2011

Annual Information Return and Income Tax secrutiny


The Central Board of Direct Taxes (CBDT) issues a list of high-value transactions every year, which can land you in the scrutiny net. These transactions constitute the Annual Information Report (AIR) under Section 285BA, rule 114E, which requires certain 'specified person(s)' to file the report every year.

When you make high-value transactions — investment in property and/or mutual funds — your bank or the respective financial institution (mutual fund house, for example) reports this to the I-T department through an AIR. The department keeps track of such transactions through your permanent account number (PAN).

The following AIR transactions need to be reported when filing returns:

  • Cash deposits of Rs 10 lakh and above
  • Credit card bills of Rs 2 lakh and above
  • Mutual fund investment of Rs 2 lakh and above
  • Purchase of bonds/ debentures worth Rs 5 lakh and above
  • Purchase of stocks worth Rs 1 lakh and above
  • Purchase of immovable property worth Rs 30 lakh and more
  • Sale of immovable property worth Rs 30 lakh and above
  • Purchase of RBI bonds worth Rs 5 lakh and above

Remember that you can file only one AIR for a financial year. However, if you want to rectify a mistake or want to furnish additional information in the report, you can file ‘supplementary information'.

“There are three situations when you may need to file supplementary information. (a) When you respond to a notice from the I-T commissioner (central information branch) within the time allowed by the commissioner. (b) To furnish additional details not submitted in the original AIR (c) In response to any deficiency indicated by the tax information network (TIN) in the provisional receipt,”

CBDT decided that senior citizens and small taxpayers, filing income-tax returns in ITR-1 and ITR-2, will be subject to scrutiny only when the department has credible information.

“For this purpose, senior citizens would be individuals who are 60 years or more. Small taxpayers would be individual and HUF (Hindu undivided family) taxpayers whose gross total income, before availing deductions under Chapter VIA, does not exceed Rs 10 lakh,” the circular said.

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