Annual Information Return

Statement of Financial Transactions or Reportable Account Annual Information Return
(Section 285BA, Rule 114E)

1. Section 285BA

Section 285BA has been substituted by the Finance Act, 2014 w.e.f. 1-4-2015.

Annual Information Return has been renamed as Statement of Financial Transaction or Reportable Account (the statement).

It is applicable in respect of transactions registered or recorded during any financial year commencing on or after 1-4-2014.

Sub-section (1) of section 285BA requires certain specified persons

who is responsible for registering or maintaining books of account or other document
containing a record of any specified financial transaction or any reportable account as may be prescribed

to furnish statement in respect such specified financial transaction or any reportable account during the financial year as may be prescribed.

One more category of specified persons viz. “a prescribed reporting financial institution” has been added to the existing ten categories of specified persons required to file the statement.

Under sub-section (2) of section 285BA the statement has to be furnished within the prescribed time, in the prescribed form and manner.

Sub-section (3) of section 285BA specifies the nature of transactions which can be prescribed by the CBDT for the purpose of reporting in the statement. Board may prescribe different values for different transactions in respect of different persons having regard to the nature of the transaction. The value of the transaction to be reported in the statement shall not be less than ₹ 50,000/-.

2. Rule 114E

Rule 114E, substituted by the Income-tax (22nd Amendment) Rules, 2015 with effect from 1st April, 2016 vide Notification No.95/2015 (F.No.142/28/2012-(SO)TPL/SO 3545(E)) dated 30th December, 2015, prescribes the nature of the transactions and the threshold value on or above which information has to submitted in the statement.

Tabular Summary Nature and Value of transactions to be reported in Statement of Financial Transaction :

Tabular Summary of Statement of Financial Transaction

Sl. No.		Nature of Financial transaction	Aggregate Value in a financial year ₹	Reporting Person
1	a	Cash Payments for purchase of bank drafts or pay orders or bankers cheques	10 lakhs or more	Banking company / institution, Co-operative Bank
	b	Cash Payments for purchase of pre-paid instruments issued by the RBI	10 lakhs or more	Banking company / institution, Co-operative Bank
	c	Cash deposits or cash withdrawals (including through bearer’s cheques) in or from one or more current account of a person	50 lakhs or more	Banking company / institution, Co-operative Bank
2		Cash deposits in one or more accounts (other than current account and time deposit) of a person	10 lakhs or more	Banking company / institution, Co-operative Bank, Post Office
3		One or more time deposits (other than renewal) of a person	10 lakh or more	Banking company / institution, Co-operative Bank, Post Office, NBFC, Nidhi
4	a.	Payments made by any person, otherwise than by cash, against Acts raised in respect of one or more credit cards issued	10 lakhs or more	Banking company/institution, Co-operative Bank or any other company/institution issuing credit card
	b	Payments made by any person, in cash, against Acts raised in respect of one or more credit cards issued	1 lakh or more	Banking company/institution, Co-operative Bank or any other company/institution issuing credit card
5		Receipts from any person for acquiring bonds or debentures (other than renewal)	10 lakhs or more	Company or institution issuing bonds or debentures
6		Receipts from any person for acquiring shares (including share application money) issued by the company	10 lakhs or more	Company issuing shares
7		Buy back of shares from any person (other than shares bought in the open market)	10 lakhs or more	Listed Company
8		Receipts from any person for acquiring units of one or more schemes of a Mutual Fund (other than transfer from one scheme to another scheme of a Mutual Fund)	10 lakhs or more	Trustee or authorised person of a Mutual Fund
9		Receipts from any person for sale of foreign currency including credit of such currency to foreign exchange card or expense in such currency through a debit card or credit card or through issue of travellers cheque or draft or any other instrument	10 lakhs or more	Authorised Dealer in Foreign Exchange
10		Purchase or sale by any person of immovable property	30 lakhs or more	Registrar, Sub-Registrar or Inspector-General
11		Receipt of cash payment for sale, by any person, of goods or services of any nature (other than those specified at Sl. Nos. 1 to 10 of this rule)	Exceeding ₹ 2 lakhs	Any person who is liable for audit under section 44AB of the Act
12		Cash deposits during the period 09th November, 2016 to 30th December, 2016 aggregating to :-
		(i) ₹ 12,50,000/- or more, in one or more current account of a person; or		(i) A banking company or a co-operative bank to which the Banking Regulation Act, 1949 (10 of 1949) applies (including any bank or banking institution referred to in section 51 of that Act);
		₹ 2,50,000/- or more, in one or more accounts (other than a current account) of a person		Post Master General as referred to in clause (j) of section 2 of the Indian Post Office Act, 1898 (6 of 1898)
13		Cash deposits during the period 1st of April, 2016 to 9th November, 2016 in respect of accounts that are reportable under Sl. No.12		(i) A banking company or a co-operative bank to which the Banking Regulation Act, 1949 (10 of 1949) applies (including any bank or banking institution referred to in section 51 of that Act); (ii) Post Master General as referred to in clause (j) of section 2 of the Indian Post Office Act, 1898 (6 of 1898

3. Applicability of the new Rules

The new rules are applicable to transactions entered on or after 1st April 2016 and the first Statement of Specified Financial Transactions will have to be furnished for the financial year 2016-17 and the same will have to be filed by 31st May, 2017

For the financial year 2015-16 the Annual Information Return will have furnished in the old Form 61A by 31st August, 2016.

4. Manner of computing the value of the transactions to be reported – Rule 114E(3)

While aggregating the amounts for determining the threshold amount for reporting in respect of any person :

all the accounts of the same nature maintained in respect of that person during the financial year shall be taken into account.
all the transactions of the same nature recorded in respect of that person during the financial year shall be aggregated.
where the account is maintained or transaction is recorded in the name of more than one person, attribute the transaction to all the persons.
apply the threshold limit separately to cash deposits in current account or cash withdrawals from current account to be reported under Sl. No.1(c) of the above table.

The above rule shall not be applicable to a reporting person mentioned at Sl. No. 9 i.e. a Authorised Dealer in foreign exchange.

5. Form No. of Statement – 114(E)(4)

Statement of Specified Financial Transactions is to be furnished in new Form No. 61A through online transmission of electronic data under digital signature of the person specified in sub-rule (7).

However in case of a reporting person is a Post Master General or a Registrar, Sub-Registrar or Inspector-General the said statement may be furnished in a computer readable media, being a CD or DVD, along with verification in Form V on paper.

The Principal Director General of Income-tax (Systems) shall specify the procedures, data structures and standards for ensuring secure capture and transmission of data.

6. Authority for accepting statement – 114E(4)

The statement is required to be furnished to the Director or Joint Director of Income-tax (Intelligence and Criminal Investigation).

7. Time Limit of Filing Statement – Rule 114E(5)

Statement of Specified Financial Transactions is to be furnished on or before 31st May, immediately following the financial year in which the transaction is registered or recorded.

8. Manner of Filing Statement – Rules 114E(6) & (7)

8.1. Registration Number to be obtained

Every reporting person shall communicate to the Principal Director General of Income-tax (Systems) the name, designation, address and telephone number of the Designated Director and the Principal Officer and obtain a Registration number.

8.2. Income-tax Department Reporting Entity Identification Number (ITDREIN)

The person filing the statement is required to quote his Income-tax Department Reporting Identification Number (ITDREIN) in para 1.2 of Part A of Form 61A.

ITDREIN is a 16 character identification number where the first 10 characters is the PAN or TAN of the reporting entity and the last 6 digits is a sequentially generated number.

The reporting entity may use a dummy number (PAN+99999 or TAN+99999) till the ITDREIN is communicated.

8.3 Signing and Verification of statement

Under sub-rule (7) the statement of financial transaction has to be signed, verified and furnished by the Designated Director specified in sub-rule (6).

If the reporting person is a non-resident, the statement may be signed, verified and furnished by a person who holds a valid power of attorney from such Designated Director.

Designated Director, means a person designated by the reporting person to ensure overall compliance with the obligations imposed under section 285BA of the Act and rules 115B to 114E and includes.

the Managing Director or a whole time Director duly authorised by the Board of Directors in case of a company.
the managing partner in case of a partnership firm.
The proprietor in case of a proprietorship concern.
The managing trustee in case of a trust.
A person or individual who controls and manages the affairs of the reporting entity in case of an unincorporated body or a body of individuals or any other person.

Principal Officer means a officer designated by the reporting person.

9. Penalty for failure to furnish Statement

Section 271FA provides that if the specified person fails to furnish the statement within the time prescribed, then the prescribed Income-tax Authority may impose a penalty of ₹ 100/- for every day during which the failure continues.

Where in pursuance of a notice issued under section (5) of section 285BA there is a failure to furnish the AIR within the period specified in the notice issued then the penalty payable shall be ₹ 500/- for every day during which the failure continues, beginning from the day immediately following the day on which the time specified in such notice for furnishing the AIR expires.

The penalty shall, however not be levied if there is a reasonable cause for the failure to furnish the AIR within the prescribed time.

10. Penalty for furnishing inaccurate information

New section 271FAA inserted by the Finance Act, 2014 w.e.f. 1-4-2015 provides that if a person referred to in clause (k) of section 285BA(1) i.e. a prescribed reporting financial institution provides inaccurate information in the statement and where:

the inaccuracy is due to failure to comply with the due diligence requirement prescribed u/s. 285BA(7) or is deliberate.
the person knows of the inaccuracy at the time of furnishing the statement but does not inform.
the person discovers the inaccuracy after furnishing the statement and fails to inform and furnish correct information within the time specified u/s. 285BA(6) then the penalty payable shall be ₹50,000/-.

11. Defective return, notice, compliances

11.1 Section 285BA (4): Notice for defective return

Where the prescribed Income-tax Authority considers that the AIR furnished under sub-section (1) is defective, he may intimate the defect to the person who has furnished such return and give him an opportunity of rectifying the defect within a period of one month from the date of such intimation or within such further period, the authority may grant on an application in this regard. If the person fails to rectify the defect within the time allowed, the prescribed Income-tax Authority will treat the return as invalid and all the provisions of this Act shall apply as if such person has failed to furnish AIR.

11.2 Section 285BA(5): Compliances in response to notice

Where a person who is required to furnish an AIR has not furnished the same within the prescribed time, the prescribed Income-tax Authority may serve upon such person a notice requiring him to furnish such return within such period as laid down by such authority but not exceeding 60 days from the date of service of such notice.

11.3 Section 285BA(6): Furnishing of correct information on discovery of inaccurate information

If the person after having furnished the statement comes to know or discovers any inaccuracy in the information provided in the statement, he shall inform the Income-tax Authority the inaccuracy and furnish the correct information in the manner as may be prescribed.

11.4 Section 285BA(7) : Registration, due diligence and record keeping

The Central Government may prescribe rules under this section specifying:

registration of persons required to furnish the statement with the prescribed Income-tax Authority.
nature and manner in which the prescribed information shall be maintained.
due diligence to be carried out by the persons for the purpose of identification of any reportable account.

12. Analysis of the New Provisions

12.1 New Provisions to be applicable from Financial Year
2016-17

Eventhough the section was substituted by the Finance Act, 2014 w.e.f. 1-4-2015 as the new rules were prescribed only on 30th December, 2015 and have been made applicable from 1st April, 2016 the first statement of specified financial transactions will have to be furnished for financial year 2016-17.

For the financial year 2015-16 Annual Information Return will continue to be applicable and will have to be furnished by 31st August, 2016.

12.2 Aggregate transactions in a financial year to be reported

Under the new rules aggregate value of the specified transactions are to be reported. Except in case of following specified transactions

purchase or sale of immovable property of ₹30 lakhs or more and
receipt of cash payment exceeding ₹2 lakhs, for sale of goods or services of any nature

all the other specified transactions are to be aggregated.

It may also be noted that in all except one transaction the monetary limit if ₹ x or more. Only in the case of receipt of cash payment for sale of any goods or services the monetary limit is more than ₹ 2 lakhs.

12.3 Persons liable to Tax Audit also required to report

Any person who is liable for audit under section 44AB of the Act is also required to report any and receipt of cash payment exceeding ₹ 2 lakhs, for sale of goods or services of any nature.

12.4 Cash deposits or cash withdrawals of ₹ 50 lakhs or more in or from current account of a bank are to be reported

Banks are required to report cash deposits or cash withdrawals in or from one or more current account of a person.

This requirement will lead to flood of unwanted data which will be very difficult for the banking industry to report and for the Income-tax Department to effective analyse and utilise the same.