Tax rules amended to speed up data collection from taxpayers
NEW DELHI: Banks, exchanges and businesses will be required to share large investor transaction data with the income tax service as often as a designated official wishes, in accordance with the rule change notified by the tax service on income Friday.
Until now, these entities were only mandated to provide a statement of their clients’ financial transactions no later than May 31 following the end of the financial year in March.
The idea is to gain information about the taxpayer’s significant transactions that will be used in the preparation of pre-filled tax returns, an initiative the government is betting on to improve tax compliance and the convenience of filing tax returns. .
The notification says that in order to make pre-filled tax returns, agencies like stock exchanges, custodians, clearing houses, registrars, banks, corporations, the Post Master General and non-bank lenders must issue reports of their clients’ financial transactions “in such form, at the frequency and in the manner specified by a designated official.
The senior director general of income tax (systems) or the director general of income tax (systems) are authorized to search for this information with the approval of the Central Commission for Direct Taxes (CBDT), states the notification. Capital gains from the sale of listed shares as well as dividend and interest income are covered by this regulation.
The change in income tax rules (4th Amendment), 2021, takes effect immediately, according to the notification.
The Income Tax Service has stepped up collecting data on important transactions in the economy and analyzing it to uncover unreported income. To facilitate this, it restricted cash transactions and introduced taxes to be withheld or levied at source on a large number of transactions. It also now actively exchanges data with Goods and Services Tax (GST) and customs authorities to match transaction details. The idea is to help formalize the economy and broaden the tax base. Adding more taxpayers would reduce tax rates.
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