Formation of Annual Information Return (AIR) by Income Tax department of India, is an important step as it will help in keeping a track of all high-value transactions made by individuals in a particular year. AIR helps department track the details of transactions worth Rs. 50,000 and above.
Certain entities that are defined below are required to file the statement of transactions by furnishing details of transactions or any other account maintained by them. The information provided allows income tax department to keep a track of the transactions these entities undertake.
The basic provisions of the AIR are as follows:
- Taxpayers filing AIR are required to add details about any financial transactions undertaken by them in a financial year with the income tax authorities. The filer can include an assessee or a prescribed person if the entity is an office of the government, public bodies and associations.
- The transactions should have an aggregate value of Rs 50,000 and above.
- Failing to file the transaction with an aggregate higher than Rs 50,000 will result in penalty ranging up to Rs 100 per day under section 271FA.
- The tax authorities will issue a notice if the filing process is not completed in the span of 30 days from date of service of notice, according to section 285BA (5).
- Post the 30-day notice given by the tax authorities, defaulters will be fined Rs 500 per day.
- If an entity comes across inaccuracy after filing the transaction report, they can rectify it within a span of 10 days from date of filing. If it is detected by tax authorities then they can issue a notice period of 30 days to rectify the transaction reports.
- Failure in rectifying inaccuracies or a failure to comply with due diligence requirements within prescribed time limits can attract a penalty of up to Rs 50,000.