The Indian Income Tax Act is a comprehensive legislation that governs taxation in India. It lays down various rules and regulations that taxpayers must comply with in order to avoid penalties and prosecution. One such provision is Section 285A of the Income Tax Act. This section deals with the obligation to furnish a statement of financial transactions. In this blog, we will understand what this section entails and what it means for taxpayers.
What is Section 285A of the Income Tax Act?
Section 285A of the Income Tax Act was introduced by the Finance Act, 2016, and came into effect from 1st June 2016. This section mandates certain persons to furnish a statement of financial transactions. The objective of this provision is to curb black money and increase tax compliance by keeping a track of high-value transactions.
Who is required to furnish a statement of financial transactions?
Section 285A mandates certain persons to furnish a statement of financial transactions. These persons are:
- A banking company or a co-operative bank.
- A post office.
- A depository.
- A registrar or sub-registrar appointed under the Registration Act, 1908.
- An issuer or a redeemer of bonds or debentures.
- An insurer or a mutual fund.
- A company or an institution issuing credit cards.
- An authorised person who is an agent of any of the above persons.
What is the timeline for furnishing the statement of financial transactions?
The statement of financial transactions must be furnished by the specified persons on or before 31st May of the financial year immediately following the financial year in which the transaction was registered or recorded.
What information is required to be furnished in the statement of financial transactions?
The statement of financial transactions must contain the following information:
- The nature of the transaction.
- The amount of the transaction.
- The date of the transaction.
- The parties involved in the transaction.
- Any other information as may be prescribed.
What are the consequences of non-compliance with Section 285A?
Non-compliance with Section 285A can attract penalties and prosecution. If a person fails to furnish the statement of financial transactions, the Income Tax Department may impose a penalty of Rs. 100 per day for each day of default. The penalty cannot exceed the amount of the transaction. Further, if the person continues to fail to furnish the statement of financial transactions even after the imposition of the penalty, he or she may be liable for prosecution under the Income Tax Act.
Conclusion:
Section 285A of the Income Tax Act is an important provision that aims to curb black money and increase tax compliance. The provision mandates certain persons to furnish a statement of financial transactions containing information on high-value transactions. Non-compliance with this provision can attract penalties and prosecution. Therefore, it is important for taxpayers to comply with the provisions of Section 285A in order to avoid any legal consequences.
Read more useful content:
- section 234e of income tax act
- section 286 of income tax act
- section 90a of income tax act
- section 40a(7) of income tax act
- section 226(3) of income tax act
- section 24 of income tax act
Frequently Asked Questions (FAQs)
Q. What is Section 285A of the Income Tax Act?
Section 285A of the Income Tax Act mandates certain persons to furnish a statement of financial transactions. The objective of this provision is to curb black money and increase tax compliance by keeping a track of high-value transactions.
Q. Who is required to furnish a statement of financial transactions under Section 285A?
The specified persons who are required to furnish a statement of financial transactions under Section 285A are:
A banking company or a co-operative bank.
A post office.
A depository.
A registrar or sub-registrar appointed under the Registration Act, 1908.
An issuer or a redeemer of bonds or debentures.
An insurer or a mutual fund.
A company or an institution issuing credit cards.
An authorised person who is an agent of any of the above persons.
Q. What is the timeline for furnishing the statement of financial transactions under Section 285A?
The statement of financial transactions must be furnished on or before 31st May of the financial year immediately following the financial year in which the transaction was registered or recorded.
Q. What information is required to be furnished in the statement of financial transactions under Section 285A?
The statement of financial transactions must contain the following information:
The nature of the transaction.
The amount of the transaction.
The date of the transaction.
The parties involved in the transaction.
Any other information as may be prescribed.
Q. What are the consequences of non-compliance with Section 285A?
Non-compliance with Section 285A can attract penalties and prosecution. If a person fails to furnish the statement of financial transactions, the Income Tax Department may impose a penalty of Rs. 100 per day for each day of default. The penalty cannot exceed the amount of the transaction. Further, if the person continues to fail to furnish the statement of financial transactions even after the imposition of the penalty, he or she may be liable for prosecution under the Income Tax Act.
Q. Is it mandatory for all taxpayers to furnish a statement of financial transactions under Section 285A?
No, it is not mandatory for all taxpayers to furnish a statement of financial transactions under Section 285A. Only the specified persons listed under the section are required to furnish the statement of financial transactions.
Q. Can a person file a revised statement of financial transactions under Section 285A?
Yes, a person can file a revised statement of financial transactions under Section 285A. However, the revised statement must be filed within the prescribed time limit and it should contain all the correct information.
Q. Can a person file the statement of financial transactions under Section 285A after the due date?
Yes, a person can file the statement of financial transactions under Section 285A after the due date. However, a penalty may be imposed for late filing. The penalty is Rs. 100 per day for each day of default, subject to a maximum of the amount of the transaction.
