While presenting the Union Budget, 2021 on 1st Feb. 2021, the Finance Minister announced for pre-filling of returns in order to ease the filing of returns. The Budget proposed that details of capital gains from listed securities, dividend income and interest from banks, post office, etc. will be pre-filled in returns. Details of salary income, tax payment, TDS, etc. are already coming pre-filled in returns.
Earlier, CBDT vide Notification No. 16/2021 dated 12.03.2021 and Income-tax (4th Amendment) Rules, 2021 amended Income Tax Rule 114E read with Section 285BA of the Income Tax Act, 1961 requiring companies, depositories, post offices and other agencies to report capital gains on transfer of listed securities or units of Mutual Funds, dividend income and interest income for the purpose of pre-filling the return of income.
The new sub-rule 5A of rule 114E specifies that the information shall be furnished in such form, at such frequency, and in such manner, as may be specified by the Director-General of Income Tax (Systems), with the approval of the Board.
Reporting entities are required to prepare the data file in a prescribed format from their internal system. An excel-based report preparation utility has also been provided to assist small reporting entities in preparing data file. The data files prepared by internal system/report preparation utility should be validated using Text File Validator/ Submission After validation, the text file is required to be compressed, encrypted and signed using the Text File Submission Utility before uploading on the reporting portal (https://report.insight.gov.in/). Reporting entities, having large number of data files, can also submit the data files using SFTP Server (specific request may be made for SFTP upload).
The statement of financial transactions has to be furnished on or before the 31st May, immediately following the financial year in which the transaction is registered or recorded.
The statement of financial transaction has to be signed, verified and furnished by the specified Designated Director. Where the reporting person is a nonresident, the statement may be signed, verified and furnished by a person who holds a valid power of attorney from such Designated Director. The data files are required to be uploaded at the reporting portal through the login credentials (PAN and password) of the designated director.
The reporting entities are advised to provide information of interest income, reported to Income Tax Department, to the account holder (in the form of Interest Certificate either through email or portal) which will enable taxpayers to reconcile the information displayed in the Annual Information Statement (AIS) (Form 26AS).
In case, the reporting person/entity comes to know or discovers any inaccuracy in the information provided in the statement or the defects have been communicated to the reporting person/entity, it is required to remove the defects by submitting a correction/deletion statement.
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