Annual Information Return – A Database of High Value Transactions

One of the mysteries for an income taxpayer is how income tax department comes to know about high-value transactions? The answer is very simple, through Annual Information Return or AIR. Besides Annual Information Return, the information is also collected through TDS (Tax Deducted at Source), TCS (Tax Collected at Source) and various other sources. As the reader’s on my blog keep posting this query to me so i thought of sharing a separate post on Annual Information Return or AIR.

Though it is a no-brainer that it is mandatory to quote PAN for certain high-value transactions. One of the objective to quote PAN is to keep a check on Black Money and tax evasion. It is not necessary that all these high-value transactions come under the radar/scanner of Income Tax Department. Therefore under section 285BA of the income tax act, 1961 it is mandatory for “specified persons” to report transactions as prescribed under rule 114E of the income tax. These specified persons are also referred as Annual Information Return Filers. All these high-value transactions are captured in Annual Information Return of an income taxpayer.

Who are Annual Information Return filers?

The following are classified as “Specified Persons” or “Reporting Person”

1. Banking Company

2. Issuer of Credit Card

3. Trustee of a Mutual Fund

4. Company or Institution issuing Bonds or Debentures

5. Company issuing shares through Public or Rights Issue

6. Registrar or Sub-Registrar appointed under section 6 of the Registration Act, 1908

7. Duly authorised officer of the Reserve Bank of India

Nature & Value of Transaction to be Reported under Annual Information Return

1. Aggregate Cash Deposits of Rs 10 Lakh or more in a year in savings bank account. For example, If you have 2 savings bank account with bank A. You deposited Rs 6 Lakh cash in each savings account during a year, it will be reported in your annual information return by bank A. Assuming these two savings accounts are with two different banks i.e. Bank A and Bank B. In this case, these transactions will not be reported in annual information return. This is an anomaly and i hope that it will be fixed soon. The ideal way is to link reporting to PAN instead of Bank specific.

From 1st April 2016 besides cash deposits, even the fixed deposits (single/multiple) of more than Rs 10 Lakh in a year will be reported in Annual Information Return. In case, i open 5 fixed deposits of Rs 2 Lakh each with a Bank A then also it will be reported to annual information return. The reporting will exclude renewal and reinvestment of the fixed deposit/s. The bank-specific anomaly will also exist in the case of fixed deposits.

2. Credit Card payment of Rs 2 Lakh or more in the year. This limit is now revised to Rs 10 Lakh from 1st April 2016. Another condition related to credit card bill payment through cash is introduced. From 1st April 2016 if your credit card bill payment through cash exceeds Rs 1 Lakh in a year then also it will be reported in your annual information return. For example, if my credit card payments/spend during FY 2016-17 is Rs 2 Lakh. But out of this credit card bill of Rs 2 Lakh, i paid Rs 1.5 Lakh through cash towards credit card bill payment then it will be mandatory to report it in AIR even though credit card spend is less than Rs 10 Lakh.

To share another example, if my credit card payment/spend for FY 2016-17 is Rs 8 Lakh. I made all the credit card bill payments online or through cheque then it will not be reported in the annual information return of AY 2017-18.

3. Mutual Funds Investment of Rs 2 Lakh or more in a year. This limit is also revised to Rs 10 Lakh from FY 2016-17.

4. If you purchased bonds or debenture amounting to Rs 5 Lakh or more in a year. This limit is revised to Rs 10 Lakh from 1st April 2016. The reporting will exclude renewal of the bonds or debentures.

5. Payment of Rs 1 Lakh or more for acquiring shares of a company through it’s Public or Rights issue. This limit is revised to Rs 10 Lakh from FY 2016-17.

6. Purchase or Sale of Immovable Property worth Rs 30 Lakh or more. The property means all types of property including land, plot, building, commercial, residential etc. Also, note that if the property is joint property then the limit of 30 Lakh is based on the property value instead of ownership pattern. For example, if i and my sister are buying a joint property of Rs 30 Lakh. We are pooling Rs 15 Lakh each and will own an equal share in the property. In this case, the property transaction will be reported in both my and my sister’s annual information return. The reason being, the property value is Rs 30 Lakh.

In case i am buying a property or property registry is of 28 Lakh but the circle rate or guidance value for calculation of stamp duty is Rs 30 lakh then also it will be reported in my annual information return.

7. Purchase of Reserve Bank of India bonds amounting in the aggregate to Rs 5 Lakh or more in a year.

*Year means Financial Year from 1st April to 31st Mar

How to Check your Annual Information Return?

You can check your Annual Information Return through form 26AS. For the benefit of readers, i am sharing the steps to check Annual Information Return.

Step 1: Login to Income Tax e-Filing portal through the following link

https://incometaxindiaefiling.gov.in/e-Filing/UserLogin/LoginHome.html

Step 2: Click on My Account >> View Form 26AS (Tax Credit) in Top Menu

Step 3: You will get a message “You will be redirected to the TDS-CPC website to view form 26AS (Tax Credit Statement)“. Click Confirm. A new window will open.

Step 4: Tick the box “I agree to the usage and acceptance of Form 16 / 16A generated from TRACES” and click on Proceed. 

Step 5: Now click on link View Tax Credit (Form 26AS) in the last section of the page

Step 6: Select Assessment Year and View As (Preferred file type) & click View/Download. Please note that for FY 2015-16, you have to select Assessment Year as AY 2016-17.

Step 7: Check Part E – Details of AIR Transaction. You may check the following sample/reference

Misconception about Annual Information Return

1. If the high-value transaction is not reported then i need not pay income tax

Though failure to file AIR by 31st Aug (revised to 31st May from FY 2016-17) attract penalty on specified persons. As a taxpayer, it does not mean that you escaped tax net. The objective of reporting in annual information return is to facilitate, cross verify, validate and cross-check the sources of income, tax paid and high-value transactions details of the taxpayer. Even if the transaction is not reported in AIR, it is still tracked by the income tax department.

2. How to file Annual Information Return?

As a taxpayer, you need not file your annual information return. As i shared earlier only the “specified persons” are responsible for reporting.

Reconcile details reported in AIR

Now you must be wondering why the section of annual information return appears in my Form 26AS. What action is required from my end? As a taxpayer, you should check Part E in your Form 26AS and reconcile the same with your actual high-value transactions. In the case of any anomaly or wrong reporting, you should immediately bring it to the notice of income tax department.

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