The CBDT requires banks to disclose interest income to taxpayers
The Central Board of Direct Taxes (CBDT) has released specific instructions for banks and businesses to follow when reporting details on taxpayers’ interest and dividend income.
A declaration of financial transaction is required by Section 285BA of the Income Tax Act of 1961 and Rule 114E. Banks will be required to disclose the information of all taxpayers whose interest income through deposits exceeds $5,000 in a fiscal year, according to the notification released on Tuesday.
There is no minimum requirement for businesses. They will be required to disclose the amount of each shareholder’s dividend. The tax department released a circular in March directing a few organisations, including banks, corporations, and brokers, to report to the tax department the interest, dividends, and capital gains received by investors last year.
The aim is for the tax department to be able to provide taxpayers with pre-filled details on tax forms. The finance minister declared in the Union Budget 2021-22 that taxpayers would receive details on capital gains and dividends pre-filled in their tax forms.
The guidelines will assist agencies in submitting uniform reports. “Reporting entities are required to prepare the data file in prescribed format from their internal system.The statement of financial transactions shall be furnished on or before 31 May, immediately following the financial year in which the transaction is registered or recorded,” said the notification.
“The statement shall be signed, verified, and furnished by the specified designation director of the bank,” it added.
The interest income received by the account holder will be reported by the banks through all bank accounts, including savings, recurring, and fixed deposits. Interest earned on PPF, non-resident foreign currency accounts, resident foreign currency accounts, and Sukanya Sumriddhi accounts, on the other hand, does not need to be registered.
The gross sum will be reported by banks. They are unable to claim the ₹10,000 deduction under Section 80TTA. The deduction can be claimed by the taxpayer by filing a Income Tax Return (ITR).
The interest charged or accrued would be transferred to the primary or first account holder in the case of joint account keeping. The details will be registered against the legal guardian’s name and PAN if the account is in the name of a minor.
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