Recently the income tax department announced a new specified financial transaction (SFTs) that will be reported under form 26 AS. These include life insurance premium, health insurance premium, share transactions among others. Here is a full list of such STFs.
What used to be a simple tax credit statement available to every taxpayer is now a complete blueprint of your high-value financial transactions. We had earlier published the first list of changes announced in form 26AS in July 2020. This article will focus on additional changes and also provide a full list of reportable SFTs.
About the author: Anjesh Bharatiya is a 30+ taxman by profession and a Chemical Engineer by education. He has been an investor in the stock market since age 15! He likes to write about personal finance, stock markets, government policies, taxation, philosophy and football.
Also by Anjesh: (1) Want to trade in stocks? Here is how your income will be taxed. (2) How to use Tax benefits on HRA and home loans (3) How to get tax benefits under a Hindu Undivided Family (HUF).
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On 13th August 2020, the Hon’ble PM unveiled a significant number of tax reforms mainly related to facilitating honest taxpayers through the introduction of a ‘Taxpayers’ Charter’ and focusing on faceless assessments & appeals. Also introduced were a few more changes extending the scope of SFTs (Specified Financial Transactions) which are specified high-value transactional information sourced from Banks, Mutual Funds and other such Financial Institutions and will be reflected in your Form 26AS. These institutions are required to file a report under Section 285BA of the Income Tax Act on certain transactions above a threshold value. The Income Tax Department also specified certain categories of taxpayers who were compulsorily required to file Income Tax Returns.
List of specified financial transactions to be available in Form 26AS
The additional SFTs that will now be reportable and will be visible in the Form 26AS are:
- Payment of educational fees/donations above Rs 1 lakh in a year
- Hotel bills exceeding Rs 20,000
- Purchase of jewellery, white goods, marbles, paintings etc. exceeding Rs 1 lakh in a year
- Life insurance premium payment over Rs 50,000 per annum
- Payment of property tax above Rs 20,000 per annum
- Electricity bill payment above Rs 1 lakh per annum
- Health insurance premium payment above Rs 20,000
- Domestic business class air travel/ foreign travel (threshold limit not yet specified)
- Share transactions/ demat accounts/ bank lockers (threshold limit not yet specified)
The SFT transactions already reportable are:
- Purchase of bank drafts or pay orders in cash (if more than Rs 10 lakh in a year)
- Purchase of pre-paid instruments in cash (if more than Rs 10 lakh in a year)
- Cash deposit in the current account (if more than Rs 50 lakh in a year).
- Cash deposit in account other than current account (if more than Rs 10 lakh in a year).
- Time deposit (if more than Rs 10 lakh in a year).
- Payment for credit card (if more than Rs 10 lakh in a year through non-cash methods. Limit is Rs 1 lakh for cash payments)
- Purchase of debentures (if more than Rs 10 lakh in a year)
- Purchase of shares (if more than Rs 10 lakh in a year)
- Buyback of shares (if the tendered value is more than Rs 10 lakh in a year)
- Purchase of mutual fund units (if more than Rs 10 lakh in a year)
- Purchase of foreign currency (if more than Rs 10 lakh in a year)
- Purchase or sale of immovable property (if more than Rs 30 lakh in a year).
- Cash payment for goods and services (if more than Rs 2 lakh in a year)
- Cash deposits during a specified period of 9th Nov to 30th Dec 2016 (if more than Rs 12.5 lakh in a current account or Rs 2.5 lakh in other accounts)
Compulsory filing of Income Tax Return
The Government has also specified compulsory filing of ITR for the following persons:
- A person having bank transactions over Rs 30 lakh in a year
- A person making payment of rent over Rs 40,000 in a year
- All professionals and businesses having turnover exceeding Rs 50 lakh in a year
The Government has also proposed deduction/collection of tax at higher rates for non-filers of return. The exact details of these measures and dates of implementation will also be notified soon.
Summary: For the Income Tax Department, these measures are aimed at matching consumption and investment patterns of taxpayers with their return profile. The PM exhorted the taxpayers in his speech on 13th August to pay proper taxes after ‘atmachintan’. He also pointed out the abysmally low percentage of taxpayers in India. The PM also said that henceforth, every taxpayer will be considered honest unless proved otherwise. The percentage of returns subjected to tax scrutiny is also coming down every year and all future proceedings will be conducted in a faceless and transparent manner. With this additional information being captured by the Department, the aim is to widen the tax base and it is imperative for taxpayers to properly reflect their transactions in their ITRs.
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