Income Tax News: Prior to making any deposits or withdrawals from the bank account, we must make sure that we won’t be responsible for any transactions that could subject you to tax under Rule 114E while still adhering to all applicable laws. Allow us to go into more detail about it.
Diverse Banking Needs
People in any industry, including those who are salaried, are required to have at least one savings account in order to meet their banking needs, though many people maintain multiple accounts for a variety of reasons. People who have steady income typically open savings bank accounts because they earn interest on the remaining balance. Have you ever wondered how much money you can deposit or withdraw from a savings account in a fiscal year to trigger income taxation, even though there is typically no cap on the total amount that can be deposited in one?
Anti-Money Laundering Measures
According to tax experts, in an effort to combat money laundering, banks, corporations, post offices, and non-bank financial companies (NBFCs) are required by law to submit financial reporting statements (SFTs) whenever the amount of transactions in a savings account exceeds a predetermined threshold. This covers cash deposits and withdrawals, real estate transactions, credit card expenses, investing in shares and mutual funds, and buying foreign currency.
Stringent Reporting Requirements
According to tax regulations, financial institutions are required to provide the tax department with information for the current year regarding any accounts that have seen regular deposits or withdrawals of at least ten lakh rupees. For cash deposits of Rs 10 lakh or more in one or more of the taxpayer’s accounts (aside from current accounts and time deposits) during a fiscal year, this cap is taken into account collectively. It assists the tax officer in determining the sources of funds, the type of receipts, and whether or not the taxpayer has paid the appropriate taxes, according to Aarti Raote, partner at Deloitte India.
Cautionary Reporting Obligations
As a result, if there has been a transaction of Rs 10 lakh or more in your account, you should exercise caution as you are required to report to the tax authorities any cash deposits and withdrawals of Rs 10 lakh or more in a financial year. The current account cap is set at Rs 50 lakh and higher. But in addition to that transaction, there are a few more that you should be aware of. Regarding income and expenses derived from accounts, one should be aware of Income Tax Rule 114E, according to Kapil Rana, founder and chairman of Hastebook Limited.
Banking Regulation Act of 1949
Any banking institution or cooperative bank that offers bank account services must abide by the Banking Regulation Act of 1949. The following bank account transactions must be reported by them:
- Excluding one or two current and time deposit accounts that receive deposits totaling at least Rs 10 lakh during a fiscal year.
- For the purchase of bank drafts, pay orders, bankers checks, and prepaid instruments issued by the Reserve Bank of India under Section 18 of the Payment and Settlement Systems Act 2007, at least ten lakh has been paid in cash collection in a financial year.
Credit Card Issuers’ Reporting Obligations
Any business or organisation that issues credit cards, a cooperative bank covered by the Banking Regulation Act of 1949, or any other type of business must report the following transactions:
- Paying one lakh or more in cash in a fiscal year towards the balance of one or more credit cards that have been issued
- Paying ten lakh or more in any method towards the balance of one or more credit cards that have been issued.
Reporting Large Payments for Bonds and Debentures
If a person gives a company or institution that issues bonds or debentures more than ten lakh rupees, the recipient must report the payment to the company or institution within the same financial year. company-issued bonds or debentures (apart from the amount received as payment for renewal). In the event that the company decides to issue shares, in order to obtain the shares, an amount of ten lakh rupees or more must be reported in each fiscal year.
Companies Act 2013 Mandate
A company listed on a recognised stock exchange is required by Section 68 of the Companies Act 2013 to report any purchases of shares from any person in an amount equal to or greater than Rs 10 lakh during a financial year. A mutual fund trustee or other person in charge of the fund’s operations is required to report receiving payments from individuals for purchasing units in one or more of the fund’s schemes totaling at least ten lakh rupees during the fiscal year. (Amounts received as a result of switching from one mutual fund scheme to another are not included).
Foreign Currency Sale Reporting
Any individual who receives payments for the sale of foreign currency from another person totaling ten lakh rupees or more in a financial year must report the transaction to the authorised person mentioned in clause (c) of section 2 of the Foreign Exchange Management Act 1999. Any purchase or sale of immovable property worth Rs 30 lakh or more by any person must be reported to the Inspector General designated under Section 6 of the Registration Act 1908 or the Registrar or Sub-Registrar appointed under Section 6 of that Act. Therefore, we must confirm that we are exempt from paying tax under Rule 114E while adhering to all applicable laws before depositing or withdrawing any money from the bank account.
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