Who is Required to Furnish Annual Information Return (AIR) Under Section 285BA of the Income Tax Act? Section 285BA of the Income Tax Act, 1961 mandates the filing of Annual Information Return (AIR), now referred to as the Statement of Financial Transactions (SFT). Certain specified entities are reqRead more
Who is Required to Furnish Annual Information Return (AIR) Under Section 285BA of the Income Tax Act?
Section 285BA of the Income Tax Act, 1961 mandates the filing of Annual Information Return (AIR), now referred to as the Statement of Financial Transactions (SFT). Certain specified entities are required to report high-value transactions to the Income Tax Department.
1. Who is Required to Furnish AIR/SFT?
The following specified persons/entities must file AIR/SFT if they conduct transactions exceeding prescribed limits:
Specified Person
Nature of Transaction Reported
Threshold Limit
Banks (including co-operative banks)
Cash deposits in savings account
₹10 lakh or more per financial year
Cash deposits/withdrawals in current account
₹50 lakh or more per financial year
Post Offices
Deposits in fixed deposits (excluding renewals)
₹10 lakh or more per financial year
Mutual Fund Companies
Purchase of mutual funds
₹10 lakh or more per financial year
Companies Issuing Shares
Purchase of shares (including IPO)
₹10 lakh or more per financial year
Companies Issuing Bonds/Debentures
Purchase of bonds or debentures
₹10 lakh or more per financial year
Credit Card Issuers
Credit card bill payments
₹1 lakh (cash) or ₹10 lakh (non-cash) per financial year
Registrar or Sub-registrar
Sale/Purchase of immovable property
₹30 lakh or more per transaction
Foreign Exchange Dealers
Foreign exchange transactions
₹10 lakh or more per financial year
Listed Companies
Buyback of shares from a person
₹10 lakh or more per financial year
Jewelry & Luxury Goods Sellers
Sale of jewelry, bullion, or goods/services
₹2 lakh or more (cash transaction)
2. When & How to File AIR/SFT?
✔️ Due Date:May 31 of the following financial year. ✔️ Mode of Filing: Electronically through Form 61A. ✔️ Details Required: PAN of transacting persons, transaction details, and value.
3. What Happens if AIR/SFT is Not Filed?
🔴 Penalty under Section 271FA – ₹500 per day for late filing. 🔴 Higher penalty of ₹1,000 per day if notice is issued by the Income Tax Department. 🔴 Possible scrutiny or inquiry notices if high-value transactions are unreported.
4. How Does the Income Tax Department Use This Data?
✔️ Cross-verifies transactions with ITR filings. ✔️ Identifies tax evasion and undisclosed income. ✔️ Tracks PAN-linked high-value transactions for scrutiny.
Final Thought
If you are a business or entity covered under Section 285BA, ensure timely compliance with AIR/SFT filing to avoid penalties and scrutiny.
Financial Transactions Covered in Annual Information Return (AIR) The Annual Information Return (AIR), now integrated into the Statement of Financial Transactions (SFT) under the Income Tax Act, requires specified entities (banks, financial institutions, registrars, etc.) to report high-value financRead more
Financial Transactions Covered in Annual Information Return (AIR)
The Annual Information Return (AIR), now integrated into the Statement of Financial Transactions (SFT) under the Income Tax Act, requires specified entities (banks, financial institutions, registrars, etc.) to report high-value financial transactions to the Income Tax Department.
1. Who Needs to File AIR/SFT?
The following entities must report transactions exceeding the specified limits: ✔️ Banks & Post Offices ✔️ Mutual Fund Companies ✔️ Stock Exchanges & Depositories ✔️ Companies Issuing Bonds & Shares ✔️ Property Registrars
2. Key Financial Transactions Reported in AIR/SFT
Nature of Transaction
Threshold for Reporting
Reported by
Cash deposits in savings account
₹10 lakh or more in a financial year
Banks/Post Offices
Cash deposits/withdrawals in current account
₹50 lakh or more in a financial year
Banks
Fixed deposit transactions
₹10 lakh or more in a financial year (excluding renewal)
Banks/Post Offices
Credit card bill payments
₹1 lakh (cash) or ₹10 lakh (other modes) in a financial year
Banks
Purchase of shares, debentures, bonds, or mutual funds
₹10 lakh or more in a financial year
Companies & Mutual Fund Houses
Purchase/sale of immovable property
₹30 lakh or more
Sub-registrars
Buyback of shares by a listed company
₹10 lakh or more
Listed Companies
Foreign currency purchases (Forex transactions)
₹10 lakh or more
Authorized Forex Dealers
Payment for travel, hotel, or jewelry purchases
₹2 lakh or more in cash
Businesses
Sale of motor vehicle (excluding two-wheelers)
Any amount
Motor Vehicle Dealers
3. How is AIR/SFT Data Used by the Income Tax Department?
✔️ Cross-verification of tax returns to detect undisclosed income. ✔️ Matching financial transactions with the taxpayer’s PAN. ✔️ Identifying high-value transactions that may require scrutiny. ✔️ Ensuring compliance with tax laws and preventing tax evasion.
4. How to Avoid Tax Scrutiny Due to AIR/SFT Reporting?
✅ Ensure that your PAN is linked to all financial transactions. ✅ Report all high-value transactions accurately in your ITR. ✅ Keep supporting documents (bank statements, property agreements, etc.) for verification. ✅ Avoid cash transactions exceeding prescribed limits to prevent scrutiny.
Final Thought
AIR/SFT helps the Income Tax Department track large transactions to detect tax evasion. If you have undertaken such transactions, declare them properly in your tax return to avoid any penalties.
Penalty on Under-Reporting of Income under the Income Tax Act Under the Income Tax Act, 1961, under-reporting of income is penalized under Section 270A. The penalty is imposed when a taxpayer declares lower income than what is assessed by the tax department. 1. What is Considered Under-Reported IncoRead more
Penalty on Under-Reporting of Income under the Income Tax Act
Under the Income Tax Act, 1961, under-reporting of income is penalized under Section 270A. The penalty is imposed when a taxpayer declares lower income than what is assessed by the tax department.
1. What is Considered Under-Reported Income?
A taxpayer is considered to have under-reported income if: ✔️ The assessed income exceeds the declared income. ✔️ Loss claims are reduced due to incorrect reporting. ✔️ Expenses are disallowed due to non-compliance. ✔️ Income is detected during reassessment exceeding earlier returns. ✔️ Income is found in search/survey operations but not reported.
2. Penalty for Under-Reporting Income (Section 270A)
Nature of Under-Reporting
Penalty Rate
Normal under-reporting (without misreporting)
50% of tax payable on under-reported income
Misreported income (fraud, false entries, fake invoices, suppression of facts, etc.)
200% of tax payable on under-reported income
📌 Example:
Declared Income = ₹8 lakh
Assessed Income (after adding under-reported income) = ₹12 lakh
Additional Tax Due = ₹1.2 lakh
Penalty (50% of ₹1.2 lakh) = ₹60,000 (if not misreported)
Penalty (200% of ₹1.2 lakh) = ₹2.4 lakh (if misreported)
3. When No Penalty is Levied?
The penalty will not be imposed if: ✔️ The taxpayer voluntarily revises the return before scrutiny. ✔️ The under-reporting happened due to genuine differences in tax interpretation. ✔️ The income addition is due to a transfer pricing adjustment. ✔️ The taxpayer can justify the mistake with reasonable evidence.
4. How to Avoid Penalty for Under-Reporting?
✅ File accurate tax returns with complete disclosures. ✅ Respond to tax notices and justify any discrepancies. ✅ Maintain proper documentation for deductions and income sources. ✅ If errors are found, revise the return voluntarily before scrutiny begins.
Final Thought
Under-reporting income can attract a minimum 50% penalty and up to 200% in case of misreporting. To avoid penalties, ensure accurate reporting and comply with tax regulations.
How Tax is Calculated on Under-Reported Income? Under the Income Tax Act, 1961, if an assessee under-reports income, tax and penalties are levied under Section 270A. The tax calculation depends on the nature of the under-reported income and whether the misreporting was deliberate or unintentional. 1Read more
How Tax is Calculated on Under-Reported Income?
Under the Income Tax Act, 1961, if an assessee under-reports income, tax and penalties are levied under Section 270A. The tax calculation depends on the nature of the under-reported income and whether the misreporting was deliberate or unintentional.
1. What is “Under-Reported Income”?
Under Section 270A, under-reported income includes: ✔️ Income assessed by the tax officer exceeding income declared in the return. ✔️ Reduction in loss claims due to incorrect reporting. ✔️ Expenses disallowed due to incorrect claims. ✔️ Income found during reassessment exceeding previously assessed income.
2. Tax Calculation on Under-Reported Income
Tax is calculated as follows:
📌 Step 1: Compute Total Income (including the under-reported portion). 📌 Step 2: Apply the income tax slabs/rates applicable to the assessee. 📌 Step 3: Compute additional tax liability due to under-reported income. 📌 Step 4: Add penalty under Section 270A:
Situation
Penalty Rate
Normal under-reported income (not misreported)
50% of tax payable on under-reported income
Misreported income (fraud, fake invoices, suppression of facts, etc.)
200% of tax payable on under-reported income
✅ Example:
Declared Income = ₹10 lakh
Assessed Income (after adding under-reported income) = ₹15 lakh
Additional Income Tax (due to ₹5 lakh under-reporting) = ₹1.5 lakh
Penalty (50% of ₹1.5 lakh) = ₹75,000 (if not misreported)
Penalty (200% of ₹1.5 lakh) = ₹3 lakh (if misreported)
3. Exceptions: No Penalty on Under-Reporting
No penalty is levied if: ✔️ The taxpayer voluntarily corrects the mistake in the return before receiving notice. ✔️ Income was under-reported due to a genuine difference in opinion in tax interpretation. ✔️ The under-reporting results from a tax audit adjustment (not intentional suppression).
4. How to Avoid Penalty on Under-Reported Income?
✔️ Ensure accurate tax filing with full disclosures. ✔️ Respond to notices and explain differences properly. ✔️ If errors are found, file a revised return before scrutiny starts. ✔️ Consult a tax professional for complex income classifications.
Final Thought
Tax on under-reported income is calculated based on normal tax slabs, but penalties can go up to 200% of the tax amount for misreporting. To avoid heavy penalties, always ensure accurate and transparent tax reporting.
Penalty on Concealment of Income in Search Cases Under the Income Tax Act, 1961, if undisclosed income is found during an Income Tax Search (Raid) conducted under Section 132, penalties are levied under Section 271AAB. 1. What is "Undisclosed Income" in Search Cases? As per Section 271AAB, "undiscloRead more
Penalty on Concealment of Income in Search Cases
Under the Income Tax Act, 1961, if undisclosed income is found during an Income Tax Search (Raid) conducted under Section 132, penalties are levied under Section 271AAB.
1. What is “Undisclosed Income” in Search Cases?
As per Section 271AAB, “undisclosed income” refers to: ✔️ Unaccounted money, assets, or documents found during the search. ✔️ Income that is not recorded in books of accounts and not disclosed before the search. ✔️ False entries or suppression of income detected during the search.
2. Penalty Provisions Under Section 271AAB
The penalty for concealment of income in search cases depends on the circumstances under which the disclosure is made.
Situation
Penalty Rate
Assessee admits the undisclosed income during the search, files return & pays tax before the due date
30% of undisclosed income
Assessee does NOT admit undisclosed income but cooperates in search & files return on time
60% of undisclosed income
Assessee does NOT admit income, does NOT cooperate, or does NOT file the return on time
Up to 90% of undisclosed income
📌 Note: If the case falls under Section 271(1)(c) (general penalty for concealment of income) instead of Section 271AAB, the penalty can be 100% to 300% of the tax evaded.
3. Important Considerations
✔️ The penalty is mandatory if undisclosed income is detected in a search. ✔️ If the taxpayer voluntarily discloses the income before the search begins, no penalty is levied. ✔️ If the taxpayer fails to cooperate, the penalty can go up to 90% of the concealed income.
4. How to Avoid Maximum Penalty?
✔️ Voluntarily disclose any unreported income before a search happens. ✔️ Cooperate with tax authorities during the search proceedings. ✔️ File the return on time and pay taxes on undisclosed income.
Final Thought
The penalties under Section 271AAB are severe. If you anticipate any undisclosed income, it’s always better to voluntarily disclose and pay taxes rather than face high penalties and legal action in search cases.
Penalty for Non-Filing of Quarterly TDS Return Failure to file a quarterly TDS return within the due date attracts late fees and penalties under the Income Tax Act. The penalties are primarily covered under Section 234E and Section 271H. 1. Late Fee Under Section 234E If the quarterly TDS return isRead more
Penalty for Non-Filing of Quarterly TDS Return
Failure to file a quarterly TDS return within the due date attracts late fees and penalties under the Income Tax Act. The penalties are primarily covered under Section 234E and Section 271H.
1. Late Fee Under Section 234E
If the quarterly TDS return is not filed within the due date, a late fee of ₹200 per day is applicable until the return is filed. However, this fee: ✔️ Cannot exceed the total amount of TDS deducted. ✔️ Must be paid before filing the return.
Example:
If TDS return is delayed by 20 days, the late fee = ₹200 × 20 = ₹4,000.
However, if the total TDS deducted is ₹3,500, the maximum late fee will be ₹3,500 (not ₹4,000).
2. Penalty Under Section 271H
Apart from the late filing fee under Section 234E, an additional penalty under Section 271H may be imposed if the TDS return is not filed within one year from the due date.
📌 Penalty Amount: ₹10,000 to ₹1,00,000. 📌 Applicable for: ✔️ Non-filing of TDS return. ✔️ Filing an incorrect TDS return (if not corrected in time).
🔹 When is the penalty under Section 271H NOT levied? If the taxpayer meets all the following conditions: ✔️ TDS has been deposited to the government account. ✔️ Late fee under Section 234E has been paid. ✔️ TDS return is filed before the expiry of one year from the due date.
3. Interest on Late Deposit of TDS (Section 201(1A))
If TDS is deducted but not deposited to the government, interest is charged: 🔹 1% per month from the due date of deduction to the actual deduction date. 🔹 1.5% per month from the deduction date to the date of payment to the government.
4. How to Avoid Penalty?
✔️ File TDS returns within the due dates:
Q1 (April – June) → 31st July
Q2 (July – September) → 31st October
Q3 (October – December) → 31st January
Q4 (January – March) → 31st May ✔️ Ensure timely payment of TDS to the government. ✔️ If delayed, file at the earliest to minimize penalties. ✔️ Apply for a waiver under Section 271H if eligible.
Final Thought
Failure to file a TDS return attracts late fees, penalties, and interest. If you have missed the deadline, file the return immediately to minimize the financial impact. If required, you can appeal for waiver of the penalty under Section 271H by showing a genuine reason.
Please refer to the link on how to avoid late fees and penalties on the TDS return.
Yes, there are certain ways to avoid or minimize the penalty imposed for failure to furnish a TDS return under the Income Tax Act. The penalties are primarily covered under Sections 234E and 271H of the Act. 1. Understanding the Penalty for Late Filing of TDS Return Late Fee under Section 234E: A fiRead more
Yes, there are certain ways to avoid or minimize the penalty imposed for failure to furnish a TDS return under the Income Tax Act. The penalties are primarily covered under Sections 234E and 271H of the Act.
1. Understanding the Penalty for Late Filing of TDS Return
Late Fee under Section 234E:
A fine of ₹200 per day is levied until the TDS return is filed.
The total penalty cannot exceed the amount of TDS deducted.
Penalty under Section 271H:
A minimum penalty of ₹10,000 and a maximum of ₹1,00,000 may be imposed for failure to file the return within one year.
This penalty is in addition to the late fee under Section 234E.
2. Ways to Avoid or Reduce the Penalty
✅ File the TDS Return at the Earliest
If you have missed the deadline, file the TDS return as soon as possible to minimize the late filing fee under Section 234E.
✅ Request for Waiver of Penalty under Section 271H
Under certain circumstances, the Assessing Officer (AO) may waive the penalty under Section 271H if:
TDS is deposited to the government account.
Late filing fees under Section 234E are paid.
TDS return is filed before the expiry of one year from the due date.
✅ File an Appeal to the Commissioner of Income Tax (CIT) (Appeals)
If a penalty is levied, you can challenge the order before the CIT(A) by providing a reasonable cause for delay (e.g., technical issues, natural calamities, unavoidable business disruptions).
✅ Apply for Condonation of Delay
In some genuine cases, the Income Tax Department may consider a condonation request if the delay was beyond your control.
✅ Ensure Correct Filing of Returns to Avoid Additional Penalties
Incorrect filing of TDS returns may increase penalties. Always verify:
If you have missed filing a TDS return, do not delay further. File it immediately and pay the late fees to minimize the financial burden. If there is a reasonable cause for the delay, you may approach the IT department for penalty relief under Section 271H.
Yes, when purchasing a flat from an individual or entity (other than under a development agreement), you may be required to deduct TDS under Section 194IA of the Income Tax Act if the transaction meets certain conditions. TDS on Purchase of Property: Key Provisions Threshold Limit: If the sale consiRead more
Yes, when purchasing a flat from an individual or entity (other than under a development agreement), you may be required to deduct TDS under Section 194IA of the Income Tax Act if the transaction meets certain conditions.
TDS on Purchase of Property: Key Provisions
Threshold Limit:
If the sale consideration of the property is ₹50 lakh or more, TDS is applicable.
If the amount is below ₹50 lakh, no TDS deduction is required.
TDS Rate:
The buyer must deduct 1% TDS on the total transaction value if the seller is a resident Indian.
If the seller is a Non-Resident Indian (NRI), then TDS under Section 195 applies at a higher rate (generally 20% plus surcharge and cess, depending on the capital gain).
When to Deduct TDS:
TDS should be deducted at the time of payment to the seller (whether full payment or installment).
Deposit of TDS:
The deducted TDS should be deposited with the government using Form 26QB within 30 days from the end of the month in which TDS is deducted.
The buyer must issue a TDS certificate (Form 16B) to the seller after payment.
TDS on Property Purchase from an NRI
If you are buying a property from an NRI, TDS is deducted under Section 195 instead of 194IA.
The TDS rate varies based on the nature of the capital gains (long-term or short-term) and is usually 20% (plus surcharge and cess) on long-term gains.
Important Points to Note
✅ TDS is deducted by the buyer, not the seller. ✅ TDS applies on the entire sale consideration, not just the amount exceeding ₹50 lakh. ✅ Ensure to collect the seller’s PAN before deducting TDS to avoid higher tax deduction (20% in case of no PAN). ✅ If the seller applies for a lower TDS certificate under Section 197, TDS may be deducted at a lower rate.
Is a Director Required to Disclose His Interest in Companies Incorporated Outside India? Yes, under the Companies Act, 2013, a director is required to disclose his interest in any company, whether incorporated in India or outside India. The disclosure requirements are governed by Section 184 and RulRead more
Is a Director Required to Disclose His Interest in Companies Incorporated Outside India?
Yes, under the Companies Act, 2013, a director is required to disclose his interest in any company, whether incorporated in India or outside India. The disclosure requirements are governed by Section 184 and Rule 9 of the Companies (Meetings of Board and its Powers) Rules, 2014.
1. Section 184 of the Companies Act, 2013 – Disclosure of Interest
A director must disclose his interest in any company, body corporate, firm, or other association of individuals in which he holds: ✅ Directorship ✅ Shareholding ✅ Partnership interest ✅ Any other financial interest
🔹 Frequency of Disclosure:
At the first Board meeting after becoming a director.
At the first meeting of every financial year.
Whenever there is a change in his interest during the year.
🔹 Does it Apply to Foreign Companies? ✔ Yes, foreign companies are covered under the definition of “body corporate” as per Section 2(11) of the Companies Act, 2013. ✔ A director must disclose his interest in any foreign company where he holds directorship, shareholding, or any financial stake.
📌 Format of Disclosure: Directors must provide disclosure using Form MBP-1 at the Board meeting.
2. Section 189 – Register of Contracts & Arrangements in Which Directors are Interested
🔹 Companies must maintain a Register of Contracts (MBP-4) where all disclosures of directors’ interests are recorded. 🔹 This register is open for inspection by directors and auditors.
3. SEBI & RBI Regulations for Listed and Foreign Companies
✔ If the company is listed, the director’s interest must be disclosed under SEBI (LODR) Regulations, 2015. ✔ RBI regulations also require Indian companies with foreign subsidiaries or investments to maintain disclosures of director interests.
Final Answer
✔ Yes, a director must disclose his interest even in companies incorporated outside India. ✔ This applies to directorships, shareholding, partnerships, and financial interests. ✔ Disclosures must be made in Form MBP-1 and recorded in Register MBP-4. ✔ Compliance with SEBI and RBI regulations may also be required for listed or regulated entities.
📌 Recommendation: Directors should ensure timely disclosure of foreign company interests to avoid non-compliance and penalties under the Companies Act, 2013.
Can a Company Give a Corporate Guarantee or Offer Security for a Loan Taken by Its Subsidiary or an Interested Company? The ability of a company to give a corporate guarantee or offer security for a loan taken by its subsidiary, a company in which a director is interested, or a company with common mRead more
Can a Company Give a Corporate Guarantee or Offer Security for a Loan Taken by Its Subsidiary or an Interested Company?
The ability of a company to give a corporate guarantee or offer security for a loan taken by its subsidiary, a company in which a director is interested, or a company with common management is governed by multiple provisions under the Companies Act, 2013, SEBI Regulations, and RBI Guidelines (for NBFCs and Banks).
1. Section 185 – Loans and Guarantees to Directors and Interested Companies
Section 185 of the Companies Act, 2013 places restrictions on a company granting loans, guarantees, or securities to certain entities.
🔴 Restricted Transactions: When Guarantees are NOT Allowed
A company cannot give a loan, guarantee, or security to: ❌ Any director of the company or its holding company. ❌ Any relative of a director. ❌ Any firm in which a director or relative is a partner.
🟢 Permitted Transactions: When Guarantees ARE Allowed
A company can provide a guarantee or security if: ✅ It is for a wholly-owned subsidiary (WOS). ✅ It is for a subsidiary company, provided the funds are used for the principal business. ✅ It is in the ordinary course of business (e.g., NBFCs and banks providing guarantees). ✅ It is approved by a special resolution in the general meeting (if given to a company in which a director is interested).
📌 Key Exemption: If the guarantee is given by a holding company for a loan taken by its wholly-owned subsidiary (WOS), no special resolution is required, but disclosure is necessary.
2. Section 186 – Inter-Corporate Loans and Guarantees
Under Section 186, a company can provide loans, guarantees, or security, but there are limits:
🔹 The total amount of loans, investments, guarantees, or security should not exceed 60% of the company’s paid-up share capital, free reserves, and securities premium or 100% of free reserves and securities premium, whichever is higher. 🔹 If the company exceeds this limit, it needs: ✔ Board approval 🏢 ✔ Shareholder approval (by special resolution) 📜 ✔ Disclosure in financial statements 📄
📌 Important: Section 186 does not apply to banking companies, insurance companies, or NBFCs engaged in lending as part of their business.
3. SEBI and RBI Regulations for Listed Companies and NBFCs
If the company is listed, SEBI (LODR) Regulations, 2015 apply: ✔ Audit Committee approval required for related party transactions (RPTs). ✔ Disclosure in financial statements. ✔ Independent director approval in some cases.
For NBFCs and companies regulated by RBI: ✔ RBI Guidelines impose additional disclosure and reporting requirements for guarantees.
4. Special Considerations for Bank Loans
When a bank asks for a corporate guarantee from the parent or sister company, the following must be ensured: ✅ The guarantee is compliant with Companies Act, 2013. ✅ The board has passed a resolution authorizing the guarantee. ✅ The company has sufficient net worth and reserves to issue the guarantee. ✅ The guarantee does not violate debt covenants or SEBI Listing Regulations.
Final Answer
✔ A company can provide a corporate guarantee or security for a subsidiary’s loan, subject to Section 185 & 186 compliance. ✔ If the guarantee is for a company where a director is interested, special resolution approval is required. ✔ Listed companies and NBFCs must comply with SEBI and RBI regulations. ✔ Guarantees should not exceed permissible financial limits, and adequate disclosures must be made.
📌 Recommendation: Before issuing a corporate guarantee, companies should seek legal and financial consultation to ensure compliance with all applicable laws.
Who is required to furnish annual information return under section 285BA of Income Tax act?
Who is Required to Furnish Annual Information Return (AIR) Under Section 285BA of the Income Tax Act? Section 285BA of the Income Tax Act, 1961 mandates the filing of Annual Information Return (AIR), now referred to as the Statement of Financial Transactions (SFT). Certain specified entities are reqRead more
Who is Required to Furnish Annual Information Return (AIR) Under Section 285BA of the Income Tax Act?
Section 285BA of the Income Tax Act, 1961 mandates the filing of Annual Information Return (AIR), now referred to as the Statement of Financial Transactions (SFT). Certain specified entities are required to report high-value transactions to the Income Tax Department.
1. Who is Required to Furnish AIR/SFT?
The following specified persons/entities must file AIR/SFT if they conduct transactions exceeding prescribed limits:
2. When & How to File AIR/SFT?
✔️ Due Date: May 31 of the following financial year.
✔️ Mode of Filing: Electronically through Form 61A.
✔️ Details Required: PAN of transacting persons, transaction details, and value.
3. What Happens if AIR/SFT is Not Filed?
🔴 Penalty under Section 271FA – ₹500 per day for late filing.
🔴 Higher penalty of ₹1,000 per day if notice is issued by the Income Tax Department.
🔴 Possible scrutiny or inquiry notices if high-value transactions are unreported.
4. How Does the Income Tax Department Use This Data?
✔️ Cross-verifies transactions with ITR filings.
✔️ Identifies tax evasion and undisclosed income.
✔️ Tracks PAN-linked high-value transactions for scrutiny.
Final Thought
If you are a business or entity covered under Section 285BA, ensure timely compliance with AIR/SFT filing to avoid penalties and scrutiny.
Read: What are the financial transactions covered in annual information return?
See lessWhat are the financial transactions covered in annual information return?
Financial Transactions Covered in Annual Information Return (AIR) The Annual Information Return (AIR), now integrated into the Statement of Financial Transactions (SFT) under the Income Tax Act, requires specified entities (banks, financial institutions, registrars, etc.) to report high-value financRead more
Financial Transactions Covered in Annual Information Return (AIR)
The Annual Information Return (AIR), now integrated into the Statement of Financial Transactions (SFT) under the Income Tax Act, requires specified entities (banks, financial institutions, registrars, etc.) to report high-value financial transactions to the Income Tax Department.
1. Who Needs to File AIR/SFT?
The following entities must report transactions exceeding the specified limits:
✔️ Banks & Post Offices
✔️ Mutual Fund Companies
✔️ Stock Exchanges & Depositories
✔️ Companies Issuing Bonds & Shares
✔️ Property Registrars
2. Key Financial Transactions Reported in AIR/SFT
3. How is AIR/SFT Data Used by the Income Tax Department?
✔️ Cross-verification of tax returns to detect undisclosed income.
✔️ Matching financial transactions with the taxpayer’s PAN.
✔️ Identifying high-value transactions that may require scrutiny.
✔️ Ensuring compliance with tax laws and preventing tax evasion.
4. How to Avoid Tax Scrutiny Due to AIR/SFT Reporting?
✅ Ensure that your PAN is linked to all financial transactions.
✅ Report all high-value transactions accurately in your ITR.
✅ Keep supporting documents (bank statements, property agreements, etc.) for verification.
✅ Avoid cash transactions exceeding prescribed limits to prevent scrutiny.
Final Thought
AIR/SFT helps the Income Tax Department track large transactions to detect tax evasion. If you have undertaken such transactions, declare them properly in your tax return to avoid any penalties.
See lessWhat is the penalty on under reporting of Income under Income Tax act?
Penalty on Under-Reporting of Income under the Income Tax Act Under the Income Tax Act, 1961, under-reporting of income is penalized under Section 270A. The penalty is imposed when a taxpayer declares lower income than what is assessed by the tax department. 1. What is Considered Under-Reported IncoRead more
Penalty on Under-Reporting of Income under the Income Tax Act
Under the Income Tax Act, 1961, under-reporting of income is penalized under Section 270A. The penalty is imposed when a taxpayer declares lower income than what is assessed by the tax department.
1. What is Considered Under-Reported Income?
A taxpayer is considered to have under-reported income if:
✔️ The assessed income exceeds the declared income.
✔️ Loss claims are reduced due to incorrect reporting.
✔️ Expenses are disallowed due to non-compliance.
✔️ Income is detected during reassessment exceeding earlier returns.
✔️ Income is found in search/survey operations but not reported.
2. Penalty for Under-Reporting Income (Section 270A)
📌 Example:
3. When No Penalty is Levied?
The penalty will not be imposed if:
✔️ The taxpayer voluntarily revises the return before scrutiny.
✔️ The under-reporting happened due to genuine differences in tax interpretation.
✔️ The income addition is due to a transfer pricing adjustment.
✔️ The taxpayer can justify the mistake with reasonable evidence.
4. How to Avoid Penalty for Under-Reporting?
✅ File accurate tax returns with complete disclosures.
✅ Respond to tax notices and justify any discrepancies.
✅ Maintain proper documentation for deductions and income sources.
✅ If errors are found, revise the return voluntarily before scrutiny begins.
Final Thought
Under-reporting income can attract a minimum 50% penalty and up to 200% in case of misreporting. To avoid penalties, ensure accurate reporting and comply with tax regulations.
Read How tax is calculated on under reported Income?
See lessHow tax is calculated on under reported Income?
How Tax is Calculated on Under-Reported Income? Under the Income Tax Act, 1961, if an assessee under-reports income, tax and penalties are levied under Section 270A. The tax calculation depends on the nature of the under-reported income and whether the misreporting was deliberate or unintentional. 1Read more
How Tax is Calculated on Under-Reported Income?
Under the Income Tax Act, 1961, if an assessee under-reports income, tax and penalties are levied under Section 270A. The tax calculation depends on the nature of the under-reported income and whether the misreporting was deliberate or unintentional.
1. What is “Under-Reported Income”?
Under Section 270A, under-reported income includes:
✔️ Income assessed by the tax officer exceeding income declared in the return.
✔️ Reduction in loss claims due to incorrect reporting.
✔️ Expenses disallowed due to incorrect claims.
✔️ Income found during reassessment exceeding previously assessed income.
2. Tax Calculation on Under-Reported Income
Tax is calculated as follows:
📌 Step 1: Compute Total Income (including the under-reported portion).
📌 Step 2: Apply the income tax slabs/rates applicable to the assessee.
📌 Step 3: Compute additional tax liability due to under-reported income.
📌 Step 4: Add penalty under Section 270A:
✅ Example:
3. Exceptions: No Penalty on Under-Reporting
No penalty is levied if:
✔️ The taxpayer voluntarily corrects the mistake in the return before receiving notice.
✔️ Income was under-reported due to a genuine difference in opinion in tax interpretation.
✔️ The under-reporting results from a tax audit adjustment (not intentional suppression).
4. How to Avoid Penalty on Under-Reported Income?
✔️ Ensure accurate tax filing with full disclosures.
✔️ Respond to notices and explain differences properly.
✔️ If errors are found, file a revised return before scrutiny starts.
✔️ Consult a tax professional for complex income classifications.
Final Thought
Tax on under-reported income is calculated based on normal tax slabs, but penalties can go up to 200% of the tax amount for misreporting. To avoid heavy penalties, always ensure accurate and transparent tax reporting.
See lessWhat is the penalty on concealment of Income in search cases?
Penalty on Concealment of Income in Search Cases Under the Income Tax Act, 1961, if undisclosed income is found during an Income Tax Search (Raid) conducted under Section 132, penalties are levied under Section 271AAB. 1. What is "Undisclosed Income" in Search Cases? As per Section 271AAB, "undiscloRead more
Penalty on Concealment of Income in Search Cases
Under the Income Tax Act, 1961, if undisclosed income is found during an Income Tax Search (Raid) conducted under Section 132, penalties are levied under Section 271AAB.
1. What is “Undisclosed Income” in Search Cases?
As per Section 271AAB, “undisclosed income” refers to:
✔️ Unaccounted money, assets, or documents found during the search.
✔️ Income that is not recorded in books of accounts and not disclosed before the search.
✔️ False entries or suppression of income detected during the search.
2. Penalty Provisions Under Section 271AAB
The penalty for concealment of income in search cases depends on the circumstances under which the disclosure is made.
📌 Note: If the case falls under Section 271(1)(c) (general penalty for concealment of income) instead of Section 271AAB, the penalty can be 100% to 300% of the tax evaded.
3. Important Considerations
✔️ The penalty is mandatory if undisclosed income is detected in a search.
✔️ If the taxpayer voluntarily discloses the income before the search begins, no penalty is levied.
✔️ If the taxpayer fails to cooperate, the penalty can go up to 90% of the concealed income.
4. How to Avoid Maximum Penalty?
✔️ Voluntarily disclose any unreported income before a search happens.
✔️ Cooperate with tax authorities during the search proceedings.
✔️ File the return on time and pay taxes on undisclosed income.
Final Thought
The penalties under Section 271AAB are severe. If you anticipate any undisclosed income, it’s always better to voluntarily disclose and pay taxes rather than face high penalties and legal action in search cases.
See lessWhat is the penalty for non filing of quarterly TDS return?
Penalty for Non-Filing of Quarterly TDS Return Failure to file a quarterly TDS return within the due date attracts late fees and penalties under the Income Tax Act. The penalties are primarily covered under Section 234E and Section 271H. 1. Late Fee Under Section 234E If the quarterly TDS return isRead more
Penalty for Non-Filing of Quarterly TDS Return
Failure to file a quarterly TDS return within the due date attracts late fees and penalties under the Income Tax Act. The penalties are primarily covered under Section 234E and Section 271H.
1. Late Fee Under Section 234E
If the quarterly TDS return is not filed within the due date, a late fee of ₹200 per day is applicable until the return is filed. However, this fee:
✔️ Cannot exceed the total amount of TDS deducted.
✔️ Must be paid before filing the return.
Example:
2. Penalty Under Section 271H
Apart from the late filing fee under Section 234E, an additional penalty under Section 271H may be imposed if the TDS return is not filed within one year from the due date.
📌 Penalty Amount: ₹10,000 to ₹1,00,000.
📌 Applicable for:
✔️ Non-filing of TDS return.
✔️ Filing an incorrect TDS return (if not corrected in time).
🔹 When is the penalty under Section 271H NOT levied?
If the taxpayer meets all the following conditions:
✔️ TDS has been deposited to the government account.
✔️ Late fee under Section 234E has been paid.
✔️ TDS return is filed before the expiry of one year from the due date.
3. Interest on Late Deposit of TDS (Section 201(1A))
If TDS is deducted but not deposited to the government, interest is charged:
🔹 1% per month from the due date of deduction to the actual deduction date.
🔹 1.5% per month from the deduction date to the date of payment to the government.
4. How to Avoid Penalty?
✔️ File TDS returns within the due dates:
✔️ Ensure timely payment of TDS to the government.
✔️ If delayed, file at the earliest to minimize penalties.
✔️ Apply for a waiver under Section 271H if eligible.
Final Thought
Failure to file a TDS return attracts late fees, penalties, and interest. If you have missed the deadline, file the return immediately to minimize the financial impact. If required, you can appeal for waiver of the penalty under Section 271H by showing a genuine reason.
Please refer to the link on how to avoid late fees and penalties on the TDS return.
See lessIs there any possible way to avoid penalty imposed for failure to furnish TDS return?
Yes, there are certain ways to avoid or minimize the penalty imposed for failure to furnish a TDS return under the Income Tax Act. The penalties are primarily covered under Sections 234E and 271H of the Act. 1. Understanding the Penalty for Late Filing of TDS Return Late Fee under Section 234E: A fiRead more
Yes, there are certain ways to avoid or minimize the penalty imposed for failure to furnish a TDS return under the Income Tax Act. The penalties are primarily covered under Sections 234E and 271H of the Act.
1. Understanding the Penalty for Late Filing of TDS Return
Late Fee under Section 234E:
Penalty under Section 271H:
2. Ways to Avoid or Reduce the Penalty
✅ File the TDS Return at the Earliest
✅ Request for Waiver of Penalty under Section 271H
✅ File an Appeal to the Commissioner of Income Tax (CIT) (Appeals)
✅ Apply for Condonation of Delay
✅ Ensure Correct Filing of Returns to Avoid Additional Penalties
Final Advice
If you have missed filing a TDS return, do not delay further. File it immediately and pay the late fees to minimize the financial burden. If there is a reasonable cause for the delay, you may approach the IT department for penalty relief under Section 271H.
See lessI am buying a flat from someone, do I need to deduct TDS on the deal amount?
Yes, when purchasing a flat from an individual or entity (other than under a development agreement), you may be required to deduct TDS under Section 194IA of the Income Tax Act if the transaction meets certain conditions. TDS on Purchase of Property: Key Provisions Threshold Limit: If the sale consiRead more
Yes, when purchasing a flat from an individual or entity (other than under a development agreement), you may be required to deduct TDS under Section 194IA of the Income Tax Act if the transaction meets certain conditions.
TDS on Purchase of Property: Key Provisions
Threshold Limit:
TDS Rate:
When to Deduct TDS:
Deposit of TDS:
TDS on Property Purchase from an NRI
Important Points to Note
✅ TDS is deducted by the buyer, not the seller.
See less✅ TDS applies on the entire sale consideration, not just the amount exceeding ₹50 lakh.
✅ Ensure to collect the seller’s PAN before deducting TDS to avoid higher tax deduction (20% in case of no PAN).
✅ If the seller applies for a lower TDS certificate under Section 197, TDS may be deducted at a lower rate.
whether a director is required to disclose his interest even in companies incorporated outside India?
Is a Director Required to Disclose His Interest in Companies Incorporated Outside India? Yes, under the Companies Act, 2013, a director is required to disclose his interest in any company, whether incorporated in India or outside India. The disclosure requirements are governed by Section 184 and RulRead more
Is a Director Required to Disclose His Interest in Companies Incorporated Outside India?
Yes, under the Companies Act, 2013, a director is required to disclose his interest in any company, whether incorporated in India or outside India. The disclosure requirements are governed by Section 184 and Rule 9 of the Companies (Meetings of Board and its Powers) Rules, 2014.
1. Section 184 of the Companies Act, 2013 – Disclosure of Interest
A director must disclose his interest in any company, body corporate, firm, or other association of individuals in which he holds:
✅ Directorship
✅ Shareholding
✅ Partnership interest
✅ Any other financial interest
🔹 Frequency of Disclosure:
🔹 Does it Apply to Foreign Companies?
✔ Yes, foreign companies are covered under the definition of “body corporate” as per Section 2(11) of the Companies Act, 2013.
✔ A director must disclose his interest in any foreign company where he holds directorship, shareholding, or any financial stake.
📌 Format of Disclosure:
Directors must provide disclosure using Form MBP-1 at the Board meeting.
2. Section 189 – Register of Contracts & Arrangements in Which Directors are Interested
🔹 Companies must maintain a Register of Contracts (MBP-4) where all disclosures of directors’ interests are recorded.
🔹 This register is open for inspection by directors and auditors.
3. SEBI & RBI Regulations for Listed and Foreign Companies
✔ If the company is listed, the director’s interest must be disclosed under SEBI (LODR) Regulations, 2015.
✔ RBI regulations also require Indian companies with foreign subsidiaries or investments to maintain disclosures of director interests.
Final Answer
✔ Yes, a director must disclose his interest even in companies incorporated outside India.
✔ This applies to directorships, shareholding, partnerships, and financial interests.
✔ Disclosures must be made in Form MBP-1 and recorded in Register MBP-4.
✔ Compliance with SEBI and RBI regulations may also be required for listed or regulated entities.
📌 Recommendation: Directors should ensure timely disclosure of foreign company interests to avoid non-compliance and penalties under the Companies Act, 2013.
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Can a company give corporate guarantee or offer security in respect of any loan taken by its subsidiary/ company in which director is interested/ where management is common from the Bank?
Can a Company Give a Corporate Guarantee or Offer Security for a Loan Taken by Its Subsidiary or an Interested Company? The ability of a company to give a corporate guarantee or offer security for a loan taken by its subsidiary, a company in which a director is interested, or a company with common mRead more
Can a Company Give a Corporate Guarantee or Offer Security for a Loan Taken by Its Subsidiary or an Interested Company?
The ability of a company to give a corporate guarantee or offer security for a loan taken by its subsidiary, a company in which a director is interested, or a company with common management is governed by multiple provisions under the Companies Act, 2013, SEBI Regulations, and RBI Guidelines (for NBFCs and Banks).
1. Section 185 – Loans and Guarantees to Directors and Interested Companies
Section 185 of the Companies Act, 2013 places restrictions on a company granting loans, guarantees, or securities to certain entities.
🔴 Restricted Transactions: When Guarantees are NOT Allowed
A company cannot give a loan, guarantee, or security to:
❌ Any director of the company or its holding company.
❌ Any relative of a director.
❌ Any firm in which a director or relative is a partner.
🟢 Permitted Transactions: When Guarantees ARE Allowed
A company can provide a guarantee or security if:
✅ It is for a wholly-owned subsidiary (WOS).
✅ It is for a subsidiary company, provided the funds are used for the principal business.
✅ It is in the ordinary course of business (e.g., NBFCs and banks providing guarantees).
✅ It is approved by a special resolution in the general meeting (if given to a company in which a director is interested).
📌 Key Exemption: If the guarantee is given by a holding company for a loan taken by its wholly-owned subsidiary (WOS), no special resolution is required, but disclosure is necessary.
2. Section 186 – Inter-Corporate Loans and Guarantees
Under Section 186, a company can provide loans, guarantees, or security, but there are limits:
🔹 The total amount of loans, investments, guarantees, or security should not exceed 60% of the company’s paid-up share capital, free reserves, and securities premium or 100% of free reserves and securities premium, whichever is higher.
🔹 If the company exceeds this limit, it needs:
✔ Board approval 🏢
✔ Shareholder approval (by special resolution) 📜
✔ Disclosure in financial statements 📄
📌 Important: Section 186 does not apply to banking companies, insurance companies, or NBFCs engaged in lending as part of their business.
3. SEBI and RBI Regulations for Listed Companies and NBFCs
If the company is listed, SEBI (LODR) Regulations, 2015 apply:
✔ Audit Committee approval required for related party transactions (RPTs).
✔ Disclosure in financial statements.
✔ Independent director approval in some cases.
For NBFCs and companies regulated by RBI:
✔ RBI Guidelines impose additional disclosure and reporting requirements for guarantees.
4. Special Considerations for Bank Loans
When a bank asks for a corporate guarantee from the parent or sister company, the following must be ensured:
✅ The guarantee is compliant with Companies Act, 2013.
✅ The board has passed a resolution authorizing the guarantee.
✅ The company has sufficient net worth and reserves to issue the guarantee.
✅ The guarantee does not violate debt covenants or SEBI Listing Regulations.
Final Answer
✔ A company can provide a corporate guarantee or security for a subsidiary’s loan, subject to Section 185 & 186 compliance.
✔ If the guarantee is for a company where a director is interested, special resolution approval is required.
✔ Listed companies and NBFCs must comply with SEBI and RBI regulations.
✔ Guarantees should not exceed permissible financial limits, and adequate disclosures must be made.
📌 Recommendation: Before issuing a corporate guarantee, companies should seek legal and financial consultation to ensure compliance with all applicable laws.
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