Introduction
Income Tax is a crucial revenue source for the government, which is utilized for the development of the country. The Income Tax Act was established in 1960 to enforce income tax laws across the nation, while the Income Tax rules were introduced in 1962 to define the regulations and scope of Income Tax. One particular rule mentioned in the Act is Rule 114E. This blog aims to provide an in-depth understanding of what Income Tax Rule 114E entails and shed light on the transactions that require a statement of transactions under this rule.
What is Income Tax Rule 114E?
Income Tax Rule 114E is defined under 285BA of the Income Tax Act. This section specifies the individuals who are required to furnish statements of financial transactions while filing their Income Tax Returns. Rule 114E, part of the Income Tax Laws of 1962, states that the statement of financial transactions must be filed in Form 61A. This rule applies to certain types of transactions and reporting persons, ensuring transparency and accountability in financial dealings.
Transactions Under Rule 114E
Rule 114E covers a wide range of transactions that need to be reported. The table below illustrates the transactions falling under the scope of Rule 114E and the corresponding reporting persons:
| Serial No. | Type and Value of Transaction | Reporting Person |
|---|---|---|
| 1. | – Any payment made in cash for purchase orders/banker’s cheques/banker’s drafts exceeds Rs. 10 lakhs in the financial year. – Any cash payments exceeding Rs. 10 lakhs for acquiring prepaid financial instruments issued by RBI as dictated in 18 of Payment and Settlement Systems Act, 2007. |
Any banking company or co-operative bank as specified in the Banking Regulation Act of 1949, including institutions referred to in 51. |
| 2. | Deposits made in cash exceeding Rs. 10 lakhs in a financial year in the assessee’s accounts (excluding current accounts or time deposits). | – Any banking company or co-operative bank specified in the Banking Regulation Act of 1949, including institutions mentioned in 51. – A Postmaster General stated in 2, clause (j) of the Indian Post Office Act of 1898. |
| 3. | Time deposits made by individuals exceeding Rs. 10 lakhs in the fiscal year (excluding deposits made by renewing another time deposit). | – Any banking company or co-operative banks stated in the Banking Regulation Act of 1949, including institutions mentioned in 51. – A Postmaster General stated in 2, clause (j) of the Indian Post Office Act of 1898. – Any Nidhi as stated in the Companies Act, 406. – Any non-banking financial institution with a registration certificate as stated under 45-1A of the Reserve Bank of India Act. |
| 4. | Payments made by the assessee in cash exceeding Rs. 1 lakh in a financial year or Rs. 10 lakhs through other modes, with respect to credit card bills in their name. | Any co-operative bank or banking institution stated in the Banking Regulation Act, including institutions mentioned in 51. Other companies or banks issuing credit cards are also applicable. |
| 5. | Amount received from an individual exceeding Rs. 10 lakhs in a fiscal year, meant for the purchase of bonds or debentures issued by the company or organization (excluding amount received to transfer one scheme to another). | A company authorized to issue debentures or bonds. |
| 6. | Amount received from another individual to purchase shares issued by the company. | A company issuing shares. |
| 7. | Amount spent on buying back of shares (excluding shares purchased on the open market), exceeding Rs. 10 lakhs in a financial year. | Any company listed on a recognized stock exchange and purchases its own securities as per 68 of the Companies Act. |
| 8. | Amount received exceeding Rs. 10 lakhs in a year for the purchase of one or more Mutual Fund units (excluding amount spent on transferring one scheme to another). | A Mutual Fund Trustee or any other person authorized by the trustee. |
| 9. | Receipt from any individual regarding purchasing any foreign currency, credit in foreign exchange card, expense through credit/debit in such currency, or any other financial means. | Authorized person as per 2, Clause (c) of the Foreign Exchange Management Act, 1999. |
| 10. | Sale or purchase of any immovable property exceeding Rs. 30 lakhs as per the stamp valuation authority mentioned in 50C of the Income Tax Act. | The Inspector-General appointed in accordance with 3 of the Registration Act or any Registrar/Sub-Registrar appointed under 6 of the Act. |
| 11. | Receipt in cash exceeding Rs. 2 lakhs for the sale of goods or services (excluding transactions mentioned in Sl. Nos. 1 to 10 of Rule 114E). | Any person liable to be audited under 44AB of the Income Tax Act. |
| 12. | Cash deposits made between November 9, 2016, to December 30, 2016, exceeding: – Rs. 12,50,000 in all the current accounts of the individual. – Rs. 2,50,000 in all the accounts of the individual other than the current accounts. |
– Any banking company or co-operative bank specified in the Banking Regulation Act of 1949, including institutions mentioned in 51. – A Postmaster General stated in 2, clause (j) of the Indian Post Office Act of 1898. |
Other Transactions Under the Scope of Rule 114E
In addition to the transactions mentioned above, there are certain aspects that individuals need to consider while reporting their transactions under Rule 114E:
- Reporting persons, as mentioned in column (3) of the table (excluding persons mentioned at number 10 and 11), are required to determine the conditional amount while calculating the amount for reporting to any person mentioned in column 2 of the table. This involves:
- Considering all the accounts of the same nature mentioned in column 2 of the table.
- Calculating all the transactions of the same nature mentioned in column 2 of the table.
- Attributing the total value of the entire transaction to all individuals if the account in question is maintained or used by multiple people.
- Applying the threshold limit to withdrawals and deposits separately in case of transactions mentioned in column 2, number 1 of the table.
- The Form 61A return, as mentioned in sub-rule (1), needs to be submitted electronically to the Joint Director of Income Tax (Intelligence and Criminal Investigation) or Director of Income-tax (Intelligence and Criminal Investigation) via a dedicated server for the person’s signature unit, as per sub-rule (7).
By adhering to these guidelines and reporting the appropriate transactions, individuals ensure compliance with Income Tax Rule 114E and contribute to a transparent and accountable financial system.
Frequently Asked Questions
1. What is the purpose of Income Tax Rule 114E?
Income Tax Rule 114E ensures transparency and accountability in financial transactions by requiring individuals to report specific transactions while filing their Income Tax Returns. This helps in identifying high-value transactions and preventing tax evasion.
2. Who needs to file a statement of financial transactions under Rule 114E?
As per 285BA of the Income Tax Act, certain individuals, such as banking companies, co-operative banks, postmasters general, and authorized persons, are required to file statements of financial transactions in Form 61A.
3. Is there a threshold limit for reporting transactions under Rule 114E?
Yes, Rule 114E specifies threshold limits for different transactions. For example, cash payments exceeding Rs. 10 lakhs for acquiring prepaid financial instruments or deposits made in cash exceeding Rs. 10 lakhs in a financial year need to be reported.
4. Are all transactions reported under Rule 114E taxable?
Not all transactions reported under Rule 114E are taxable. Reporting these transactions is primarily for the purpose of maintaining transparency and accountability in financial dealings. Whether a transaction is taxable or not depends on various factors, including the nature of the transaction and the applicable tax laws.
5. Can individuals file the statement of financial transactions online?
Yes, individuals can file the statement of financial transactions online. The Form 61A return, as per Rule 114E, needs to be submitted electronically to the designated authorities via a dedicated server for the person’s signature unit.
6. What are the consequences of not complying with Rule 114E?
Non-compliance with Rule 114E can lead to penalties and other legal consequences. Failure to file the required statements of financial transactions can attract penalties as per the Income Tax Act.
7. Can individuals seek professional help for filing statements under Rule 114E?
Yes, individuals can seek the assistance of tax professionals or chartered accountants for accurately and timely filing their statements of financial transactions under Rule 114E. These professionals have expertise in tax laws and can ensure compliance with the reporting requirements.
Conclusion
Income Tax Rule 114E plays a significant role in maintaining transparency and accountability in financial transactions. By understanding and complying with the reporting requirements, individuals contribute to a fair and efficient tax system. It is essential to stay updated with the specific transactions covered under Rule 114E and ensure timely and accurate filing of the statements. Filing the required statements not only fulfills legal obligations but also showcases integrity and responsibility towards the nation’s economic growth.
For more information about PAN Card and Income Tax, you can check out the related articles:
- PAN Card and Income Tax
- Link between PAN Card and Income Tax
- PAN Card for Individuals
- Importance of PAN Cards for Individuals
- Importance/Benefits of PAN Card for Income Tax Authorities
- New PAN Rules
If you have any further queries or need assistance with filing your statements, it is advisable to consult a tax professional or visit the official website of the Income Tax Department.
Hello Reader !
If you found value in this blog post, we kindly ask you to share it with others, helping to expand their knowledge in the process. Additionally, if you are currently in search of property opportunities in Faridabad, we invite you to connect with us through our contact page.
At Faridabad Property Deals, we specialize in assisting individuals with their property needs, whether it’s buying, selling, renting, or investing. Our team of experts is dedicated to providing exceptional service and ensuring a smooth and successful experience for our clients.
To explore the available property options or to discuss your specific requirements, please call +91-9818591388 or visit our contact page at https://faridabadpropertydeals.com/contact/. We are eager to assist you in finding the perfect property solution that aligns with your needs and preferences. Thank you !