Secret Informer of Tax Department and Annual Information Return

Banking & Investment

Secret Informer of Tax Department and Annual Information Return (AIR):

To curb black money, government need secret informer and to motivate people to provide information of black money, a reward of 10% of tax collected was paid to informer. Apart from this, some Specified entities are bound to file Annual Information Return (AIR) in respect of Specified transactions. Hence Informer of Income Tax Department can be classified into two categories:

  1. Volunteer Secret Informer
  2. Specified Entities bound to file AIR

Secret Informers

There is a reward policy of government which can be reached at link given below:

Guidelines for Grant of Reward to Secret Informers

Reward policy contains detail regarding quantum of reward, mode of information and other conditions etc. If a huge sum of tax is recovered on the basis of information like 100 crore then reward value comes to 10 crore i.e. 10% of tax recovered. But Department  submitted that reward to an informer was not a payment governed by the Income Tax Act, 1961, but an exgratia payment which cannot be claimed as a legal right. He said the high court erred in holding that 10% of the tax collected had to be paid as reward whereas the fact is that this is the upper ceiling and the actual amount was to be decided by the committee as per the ‘Guidelines for Reward to Informants 1993’.

The Income Tax department has brought out new guidelines on 26th August 2015, to award secret informers who provides credible inputs against a declared defaulter would be rewarded a 10 per cent booty of tax realized from such an entity, but upto a maximum limit of Rs 15 lakh.

Specified Entities bound to file AIR

Apart from volunteer informer of income tax department there are some legally bound informers covered under section 285BA of Income Tax Act, 1961 read with rule 114E of Income Tax Rules, 1962. Under this Section, some entities are required to furnish Annual Information Return (AIR) in respect of specified financial transactions registered/recorded by them during the financial year (beginning on or after April 1, 2004) to the income-tax authority or such other prescribed authority. AIR shall be furnished electronically in Form No.61A. AIR can be prepared using NSDL AIR Preparation Utility, which is freely downloadable from NSDL-TIN website at https://www.tin-nsdl.com. Alternatively, you can use in-house facilities or any other third party software. Entities are required to file one single AIR for the whole of the organization. If an entity fails to file AIR timely then there is a penalty provision under section 271FA and 285BA(5).

Who and for which transaction is required to File AIR?

Annual Information Return (AIR) is required to be furnished by specified persons (SP) in respect of specified transactions (ST) registered or recorded by them during a financial year. The list of such persons and the specified transactions is as follows:

S. No. Specified Persons Specified Transactions
1 A Banking Company to which the Banking Regulation Act, 1949(10 of 1949), applies (including any bank or banking institution referred to in section 51 of that Act) Cash deposits aggregating to ten lakh (10, 00,000) rupees or more in a year in any savings account of a person maintained in that bank.
2 A Banking Company to which the Banking Regulation Act, 1949 (10 of 1949), applies (including any bank or banking institution referred to in section 51 of that Act) or any other Company or institution issuing credit card. Payments made by any person against bills raised in respect of a credit card issued to that person, aggregating to two lakh rupees or more in the year.
3 A trustee of a Mutual Fund or such other person managing the affairs of the Mutual Fund as may be duly authorized by the trustee in this behalf. Receipt from any person of an amount of two lakh rupees or more for acquiring units of that fund.
4 A Company or institution issuing bonds or debentures. Receipt from any person of an amount of five lakh rupees or more for acquiring bonds or debentures issued by the Company or institution.
5 A Company issuing shares through public or rights issue. Receipt from any person of an amount of one lakh rupees or more for acquiring shares issued by the Company.
6 Registrar or Sub Registrar appointed under section 6 of the Registration Act, 1908 Purchase or sale by any person of immoveable property valued at thirty lakh rupees or more.
7 A person being an officer of the Reserve Bank of India constituted under section 3 of the Reserve Bank of India Act, 1934 who is duly authorized by the Reserve Bank of India in this behalf. Receipt from any person of an amount or amounts aggregating to five lakh rupees or more in a year for bonds issued by the Reserve Bank of India.

Due Date for filing Annual Information Return(AIR)?

The due date for filing Annual Information Return is 31st August immediately following the Financial Year in which the transaction is recorded. For example, in respect of F. Y. 2015-16, the due date for filing AIR would be 31st August, 2016.

Apart from above informer Income tax department seeks information from documents provided by tax payers and other government departments like Service tax, Sales tax department, Excise Department etc. This is how information reaches to income tax department. Pay your tax timely and consult professional tax experts regularly.

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