Banks to inform tax dept of taxpayers earning interest over Rs5,000 in an FY
Premium- Interest which is exempt from tax under the Incometax Act,1961 such as interest on Public Provident Fund (PPF) account, need not be reported
NEW DELHI : New Delhi: In March, the tax department issued a circular directing a few entities, including banks, companies and brokers to report the interest, dividend and capital gains respectively earned by the investors to the tax department. Section 285BA of the Income Tax Act, 1961 and Rule 114E requires "specified reporting person" to furnish statement of financial transaction.
The tax department said in the notice that the move will enable them to provide pre-filled information in the tax forms to the taxpayers. Also, this will encourage taxpayers to report interest income in their income tax return (ITR), which they generally don’t report knowingly or unknowingly.
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Now, the tax department has issued guidelines to reporting entities, including banks, to provide details in the reporting format. As per the latest circular, banks will have to report details of all the taxpayers whose interest earned across the deposit exceeded Rs5,000 in a financial year. Interest which is exempt from tax under the Incometax Act,1961 such as interest on Public Provident Fund (PPF) account, Foreign Currency Nonresident (FCNR) account, Sukanya Samriddhi account, Resident Foreign Currency account, etc. need not be reported.
Here are some other main pointers on the guidelines issued by the tax department recently.
1) The banks will report the interest income earned by the account holder across the bank accounts, including, saving account, recurring deposit (RD) account and fixed deposit (FD) accounts.
2) The banks will have to report the gross amount. They can’t give the deduction of Rs10,000 under Section 80TTA. The taxpayer can claim the deduction under Section 80TTA by filing the income tax return (ITR) and showing the interest income in the ITR.
3) In case of joint account holding, the interest paid or accrued will be assigned to the primary or first account holder.
4) In case the account is in the name of a minor, the information will be reported against the name and permanent account number (PAN) of the legal guardian.
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5) The bank will have to report separately for each account type, that is savings, RD and FD accounts.
6) The banks will have to report the specified financial statement by 31 May, immediately after the end of the financial year in which the transaction has been registered.
7) The statement shall be signed, verified and furnished by the specified designation director of the bank.
8) The bank will send the information reported to the tax department to the taxpayer as well so that they can reconcile the information and check with the Form 26AS.
9) The bank will have to provide details such as the name, PAN, aadhaar, mobile number, email, account type and interest earned for the financial year.
10) The notification comes into effect immediately. Therefore, the banks will be reporting the details required for FY20-21.
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