Published On : Sat, May 13th, 2017

High-value transactions by doctors, lawyers under income tax lens

Mumbai: Senior tax officials are reaching out to chartered accountants and CFOs to drive home the point that by May 31 business establishments, various financial institutions and professionals, including doctors, lawyers and architects, will have to report a slew of high-value transactions such as cash deposit, credit card payments, share sale, property deals, debentures and mutual fund units among others.

Salaried individuals are not required to file the newly introduced statement of financial transactions (SFT). Entities that will have to report are banks, professionals, fund houses, forex dealers, post office, nidhis, non-banking finance companies, property registrars, companies issuing bonds and debentures, and listed companies buying back shares from specific persons.

“Many are not fully aware of the new requirement. Under the modified rules, the earlier requirement of filing annual information return (AIR) has now been replaced by SFT. The changes have created new classes of first time filers who have to file SFT of specified transactions for FY 2016-17,” said Jai Raj Kajla, Director of Income Tax (Intelligence & Criminal Investigation) while addressing tax practitioners here on Friday.

The nature of transactions includes cash payment for purchase of demand drafts or pay orders of Rs 10 lakh or more in a year; cash payment of Rs 10 lakh or more for purchase of pre-paid RBI instruments, cash deposit or withdrawal of Rs 50 lakh or more from current account; one-time deposit of Rs 10 lakh or more with banks, nidhis, NBFCs and post offices; payment of Rs 1 lakh or more in cash and Rs 10 lakh or more by other mode against credit card bill issued to a person during the year; and property registrars for deals worth Rs 30 lakh or more.

Kajla and his colleagues met close to 300 tax practitioners and corporate CFOs to explain the new rules, which would require the reporting entity to register online with the tax office. SFTs have to be filed in separate form and not along with the regular Income tax returns.

“The Directorate is conducting workshops to address various categories of reporting entities like bullion dealers, stock brokers, and dealers of automobiles and luxury goods,” said Anu Krishna Aggarwal, Additional Director of Income Tax (I&CI).

As per the new requirements, apart from specific filers like banks which used to file similar AIR returns, SFT regulations would cover any person who is liable to audit under Section 44AB of the Income Tax Act, 1961. The particular section relates to audit of businesses and professions.

The purpose of the workshops was to spell out the rules to the chartered accountants who in turn can assist taxpayers in ensuring timely and accurate SFT compliance.

Laxman Singh Gurjar, Manpreet Singh Duggal, and Aastha Madhur – all deputy directors of Income Tax – and Vishnu Agarwal, chairman of the western India council of ICAI, participated in the discussions which also dealt with the finer points of compliance.

For instance, while reporting an entity will have to take into account all the accounts of the same nature maintained in respect of a person during a financial year; also, while attributing the entire value of the transactions to all the persons in cases where the account is maintained or transactions recorded in the name of more than one person.

Filing of inaccurate information will attract penalty of Rs 50,000.