Introduction: Emphasizing Voluntary Compliance
The Income-Tax Department has been actively encouraging voluntary compliance by receiving and utilizing information about taxpayers’ financial transactions from Reporting Entities, such as Banks, Forex Dealers, and Sub-Registrars. This information plays a critical role in shaping the Annual Information Statement (AIS), which aids taxpayers in accurately filing their Return of Income.
A Deep Dive into Compliance Issues: The Tamil Nadu Bank Case
While the majority of Reporting Entities comply with the statutory requirements of filing accurate Statements of Specified Financial Transactions (SFTs), some discrepancies have been discovered. A recent investigation into a major Tamil Nadu-based bank revealed several reporting discrepancies and non-compliance issues.
Analyzing the Discrepancies: The Audit Findings
During the investigation, the department found the bank had failed to file SFTs in specific cases, while in others, it had not provided complete or accurate details. Several high-value transactions were left unreported, including cash deposits totaling over Rs. 2,700 crore across more than 10,000 accounts, specific credit card payments exceeding Rs. 110 crore, dividend distributions of more than Rs. 200 crore, and shares issued amounting to over Rs. 600 crore.
Further findings revealed that the SFTs submitted by the bank were incomplete in several respects. Notable among the unreported transactions were interest payments exceeding Rs. 500 crore, time deposits, and cash deposits and withdrawals in current accounts.
Trouble with International Compliance: AEOI
Additionally, defects were found in the bank’s filing of Form 61B for Automatic Exchange of Information (AEOI) regarding account holders who are residents of other countries. This echoes the department’s recent verification of two cooperative banks in Uttarakhand, where transactions exceeding several thousand crore not reported by the banks were identified.
The Department’s Initiative: Increasing Compliance
In response to these findings, the Income-Tax Department is organizing outreach programs across the country to educate Reporting Entities about their legal obligations and address their challenges. This initiative is designed to improve the ease of compliance.
Conclusion: Towards a Transparent Future
The Income-Tax Department’s investigation into Reporting Entities serves as a stark reminder of the importance of adhering to statutory requirements for filing financial transactions. The government’s emphasis on voluntary compliance and transparency, along with educational initiatives, demonstrates its commitment to an accountable and efficient tax system.
