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Saturday, 20 May 2017

Reporting Cash Transactions under Rule 114E of Income –Tax Rules, 1962

NEW REQUIREMENT OF FILING FORM NO 61A FOR STATEMENT OF FINANCIAL TRANSACTIONS WEF 1ST APRIL 2016: OF FINANCIAL TRANSACTIONS WEF 1ST APRIL 2016:

To keep a watch on high value transactions undertaken by the taxpayer, the Income-tax Law has framed the new concept of furnishing of “Statement of financial Transactions” in Form No 61A (previously called as ‘Annual Information Return (AIR)’. With the help of the statement the tax authorities will collect information on certain prescribed high value transactions undertaken by a person during the year.

Basic Provisions:
Statement of ‘high value financial transactions‘ is required to be furnished under section 285BA of the Income-tax Act, 1961 by ‘specified persons‘ in respect of ‘specified transactions‘ registered or recorded by them during the financial year.
The ‘specified persons’ and the ‘specified transactions’ are listed in new Rule 114E of the Income-tax Rules, 1962.
New Rule 114E of the income tax rules requires all assesses liable for tax audit u/s 44AB will have to file statement of financial transactions in Form 61A, in case of receipt of cash payment exceeding of Rs. 2,00,000/- for sale of goods/services of any nature.

Who is required to file Statement of financial Transactions?
As per new rule following persons shall be required to furnish statement of financial transactions or reportable accounts registered or recorded or maintained by them during a financial year to the prescribed authority on or after 1st day of April, 2016.
• Any person who is liable for audit under section 44AB of the Act
• Banking Company
• Co-operative Bank
• Post Master General of Post office
• Nidhi referred to in sec 406 of the Companies Act 2013
• Non-banking Financial Company (NBFC)
• Any Institution issuing Credit Card
• Company or Institution issuing bonds or debentures
• Company issuing shares
• Trustee of a Mutual Fund
• Authorized Dealer, Money Changer, Off-shore Banking Unit or any other person defined
in FEMA, 1999
• Inspector-General or Sub-Registrar appointed under Registration Act, 1908

The periodicity and due date of furnishing statement of financial transaction:
The statement of financial transactions (online return in Form No. 61A with digital signature) shall be furnished on or before the 31st May, immediately following the
financial year in which the transaction is registered or recorded.
However, section 285BA(5) empower the tax authorities to issue a notice to the person who had not filed the statement within prescribed time. In such a case, the tax authorities may serve upon such person a notice requiring him to furnish the statement within a period not exceeding 30 days from the date of service of such notice and in such a case the person shall furnish the statement within the time as specified in the notice.

Consequences of not furnishing statement of financial transactions:
Non-furnishing of statement of financial transaction or reportable account will attract penalty under section 271FA. Penalty can be levied of Rs. 100 per day of default.
However, section 285BA(5) empower the tax authorities to issue a notice to the person directing him to file the statement within a period not exceeding 30 days from the date of
service of such notice and in such a case person shall furnish the statement within the time specified in the notice. If person fails to file the statement within the specified time, then a penalty of Rs. 500 per day will be levied from the day immediately following the day on which the time
specified in such notice for furnishing the statement expires.

Failure to correct Inaccurate or defective statement of financial transaction or 
reportable account filed.
If any person, after filing the statement, comes to know or discovers any inaccuracy in
the information provided in the statement, he shall inform such inaccuracy to the prescribed income-tax authority within a period of ten days and furnish the correct
information in such manner as may be prescribed. On the other hand, the prescribed income-tax authority may also intimate the defect to
the person and give him an opportunity of rectifying the defect within a period of thirty days from the date of such intimation or within such extended period as may be allowed by prescribed income-tax authority.
However, if a person fails to rectify the defect within the said period than such statement shall be treated as an invalid statement and the provisions of this Act shall apply as if such person had failed to furnish the statement.

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