Income Tax Department Conducts Verification of Reporting Entities

The Income Tax Department has been focusing its efforts on promoting voluntary compliance. In this attempt, information on taxpayers’ financial transactions is obtained from Reporting Entities such as banks, forex dealers, sub-registrars, and so on. The information provided by the Reporting Entities is shown to the taxpayer in the form of the Annual Information Statement (AIS) via the e-filing account. This is a major step towards making it easier for people to file their income tax returns correctly.

While the majority of Reporting Entities willingly comply with the statutory obligations of filing correct and comprehensive Statements of Specified Financial Transactions (SFTs), there have been occasional instances of default.

To address Reporting Entity compliance difficulties, the Department recently verified a large Tamil Nadu-based bank.

Several inconsistencies were discovered throughout the verification process. It was discovered that the bank did not file SFTs in certain situations and did not file complete/accurate particulars in others. SFTs were not submitted for cash deposits of more than Rs.2,700 crore involving more than 10,000 accounts; specified credit card payments with a total transaction value of more than Rs.110 crore; dividends given of more than Rs.200 crore; and shares issued of more than Rs.600 crore.

Furthermore, the Bank’s previously submitted SFTs were found to be deficient in various areas. The bank neglected to declare large transactions like as interest payments in excess of Rs.500 crore, time deposits, cash deposits and withdrawals from current accounts, and so on.

The verification also found that Form 61B for Automatic Exchange of Information (AEOI) concerning account holders “resident” in foreign countries had been filed incorrectly.

In the recent past, the Department verified two cooperative banks in Uttarakhand, and transactions totaling a few thousand crores that had not been declared by the institutions were discovered.

The Department routinely organises outreach activities around the nation to clarify the legislative requirements and processes, as well as to address challenges experienced by Reporting Entities. This is just another endeavour of the Department to make compliance easier.