ITRTaxation

ITR Update: You Can’t Hide These Anymore!

The IT department now gets access to all the information related to capital gains/losses, dividend income, and fixed deposits in NBFCs. Any avoidance shall result in severe consequences.

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Earlier, the Income Tax Department used to get information only related to income from salary, interest on bank fixed deposits (Bank FD), and taxes paid from the respective sources. This information was also shown in Form 26AS. Now, the IT department will get all the information directly from your brokerage house, AMC, and post office. So, it will be difficult for the taxpayers to hide such incomes and investments.

Compulsory Disclosure of Transactions in ITR

From 1 April 2021, if you are a salaried employee who has been trading in shares regularly or has a substantial income from dividends, then you can no longer hide this information from the tax department. Until now, many taxpayers have been hiding such transactions for reasons such as avoiding the trouble of calculating the capital gains/losses, fear of filing complicated ITR forms, reducing their tax liability, or simply reducing their outgoing taxes. 

From the new financial year 2021-2022, the tax department will get all the information about your share trading, mutual fund transactions, post office deposits, dividend income, or deposits with the NBFC.

FILE YOUR ITR

Changes in Union Budget 2021

In the 2021 budget announcement, finance minister Nirmala Sitharaman said that ITR forms will henceforth come pre-filled with information such as capital gains from listed shares, dividend income, interest from banks, post office etc. to simplify the process of ITR filing. 

Further, to implement the proposals, on 12 March 2021 the CBDT released a notification stating that a specified category of persons is required to furnish their SFTs (statements of financial transaction) under Section 285BA of the Income Tax Act, 1961. It should also include information related to capital gains on the sale of listed shares or mutual funds, dividend incomes, and interest. 

The category of persons defined as per the release are recognised stock exchanges such as BSE, NSE, depositories, clearing corporation, registrars, share transfer agents, companies distributing dividends, banking companies, or a co-operative bank covered under the banking laws, the Postmaster General as defined under the Indian Post Office Act, 1898, and NBFCs.

So, from 1 April 2021, the AIS or Annual Information Statement will carry extensive data. Taxpayers will be required to show all the details of income from sources such as salary, interest, dividend, capital gains from mutual funds, and shares in the ITR. 

Any delay or non-reporting of these incomes by the taxpayer may result in severe penalties.

The process of filing tax returns has changed tremendously over the years. Even a minor error may invite a notice from the IT department for explanation or correction. Those who consult a tax expert are less likely to get a notice because the compliance requirement is being managed by a professional. So if you want to make this process simpler, you can reach out to experts at Vakilsearch. All you need to do is click here and sign up to get our expert assistance.

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