Annual Information return-Taxman is tracking your transactions

annual information return

AIR or Annual information return is one of the many ways with which Income tax authorities collects the information on various high-value transactions made by you in the previous year.

Have a look at your 26AS statement and you will find that along with the Tax deducted at source (TDS) details it also shows the information shared by different entities on some of your transactions.

Though you think that there are different ways of tax evasion and by splitting your investments in different bank deposits or in different securities you can save yourself from Income tax, but you are wrong. You can run but you can’t hide.

In last few years, many people in my known circle had received notices from IT department, demanding an explanation on specific transactions.

Sandeep, who helped his friend by lending him his Credit card for wedding shopping, also received the notice, because the total spending on his card had exceeded Rs 2 lakh in a year.

Rahul also received a notice asking to explain the source of funds for mutual fund investments, quoting his switch transactions, as switch itself considered as a fresh buying and the amount of the switch, in this case, exceeded Rs 2 lakh.

Nowhere i am saying that anyone who transacts like this will get IT notice. IT notices are sent on Random basis or if they find some discrepancies in your IT return in comparison to transactions you are making.

You need not to worry in case you have an appropriate explanation of the transaction, but awareness of the rules may help you in avoiding some of them, which may cause unnecessary trouble of explanation in future.

You need not worry in case you have the appropriate explanation of the transaction, but awareness of the rules may help you in avoiding some of them, which may cause unnecessary trouble of explanation in future.

There are some specific transactions listed down by IT department which needs to be reported under AIR regulations.

What is Annual Information Return (AIR) and who files it?

As per section 285BA of Income tax act, some specified entities which include Banks, Mutual fund houses, Institutions/Companies issuing Bonds or equity shares all are required to report specified transactions to Income tax authorities. Even your property transactions of specified values are to be reported by the office of Registrars/Sub-registrars.

These institutions have to file Annual Information Return carrying specified transactions of specified values to Income tax department before 31st May of following year.

List of Transactions reported under Annual Information Return (AIR)

Recently there are some additions and revisions (w.e.f 01/04/2016) in the list of transactions that are to be reported, so I will be sharing with you both set of guidelines (Old& Revised) to clear off any confusion.

The earlier rule requires the following transactions to be reported under AIR

  1. Cash deposit in bank savings account in a financial year if exceeds Rs 10 lakh in aggregate.
  2. Credit card payments if exceeds Rs 2 lakh in a year.
  3. Mutual funds Investment of Rs 2 lakh or more
  4. Investment of Rs 5 lakh or more in bonds/debentures.
  5. Investment in equity shares exceeding Rs 1 lakh.
  6. Purchase/sale of Immovable property valuing Rs 30 lakh or more.
  7. Investment in RBI bonds for Rs 5 lakh or more in a year.

Some of these rules have been tweaked recently, some are expanded with specific inclusions and some new are added. Please find the list below

List of Transactions to be reported under AIR w.e.f 01 April 2016 (CBDT Notification 95/2015- 30/12/2015)

  1. Bank Deposits:
  • Cash deposits aggregating Rs 10 lakh or more in one or more accounts (Other than current or Time deposit account).
  • Investing in One or more time deposits of Rs 10 lakh or more in aggregate. This does not include time deposit made on the renewal of the older one.
  • Cash deposits or cash withdrawals (Including through a bearer Cheque), aggregating to Rs 50 lakh or more in a financial year, in one or more than one Current accounts.
  • Payment in cash to bank aggregating Rs 10 lakh or more in a financial year to issue Demand draft, pay order or bankers’ Cheque or to buy any prepaid instruments issued by RBI

Regarding the above-mentioned transactions even the Post offices and NBFC (Non-banking Finance companies) are required to report in AIR

  1. Credit cards:
  • Payments made to credit cards in respect of Bills raised exceeds in aggregate to:
  • Rs 1 lakh or more, if paid in cash or
  • Rs 10 lakh or more, by any other means

to be reported by the credit card issuing company/bank.

(Read: How to use credit cards to your advantage?)

  1. Investments in Shares:
  • Your investments in shares will be reported by the company concerned if the total purchase value in aggregate in that share is of Rs 10 lakh or more. It includes share application money too.
  • This also applies when you opt for buy-back offer of the company and your transaction value is Rs 10 lakh or more in aggregate in a financial year.

Important

In the case of joint accounts or holdings, the same information shall be furnished for all Joint holders.

  1. Investments in Mutual funds:
  • Investments in mutual funds of Rs 10 lakh or more in aggregate in a financial year to be reported by Mutual fund companies in Annual Information Return (AIR)
  1. Investments in Bonds and debentures:
  • Investments in Bonds and debentures of Rs 10 lakh or more in aggregate in a financial year to be reported by the issuing company.
  1. Purchase and sale of immovable property:
  • If the transaction is of Rs 30 lakh or more, then the Registrar or Sub-Registrar has to report this to IT authorities through AIR.
  1. Buy/Sell Foreign Currency:

Any buying of foreign currency or travelers card or Draft, and also selling/spending in foreign currency through card, cash or cheque, with a transaction value of Rs 10 lakh or more in aggregate in a financial year have to be reported by authorized person under FEMA

  1. Buying Goods or services exceeding Rs 2 lakh in cash to be reported by the seller ( provided the seller is liable for audit u/s 44AB of the act)
  2. Cash deposits during the period 09th November, 2016 to 30th December, 2016 aggregating to ̶( Vide notification no. 104/2016dated 15.11.2016)(i) twelve lakh fifty thousand rupees or more, in one or more current account of a person; or (ii) two lakh fifty thousand rupees or more, in one or more accounts (other than a current account) of a person

The idea behind all these revisions in Annual Information Return (AIR) rules, is to curb black money mess and track high-value cash transactions.

As I wrote earlier, there is nothing to worry for those who have all the explanation for their transactions, and paying taxes on all taxable income. But still awareness of rules helps in avoiding some of the transactions, which may put you into a scrutiny later on by IT people.

Do read out your 26AS statement, just to check if something is reported under AIR is factually correct or not, and if not then do raise the concern with the respective authority.

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