It is extremely difficult for the income tax (IT) department of India to track the high-value transactions made by individuals. Annual Information Return helps the IT department track the details of transactions worth Rs.50,000 and above.
What is Annual Information Return?
To monitor transactions of high values, the income tax law has now framed a concept of Annual Information Return (AIR). This will help tax officials to collect information on high value transactions of individuals undertaken in a particular year. 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 Annual Information Return are as follows:
- Filers are to furnish details of any financial transactions undertaken by them in a financial year with the income tax authorities. Filers or entities can include an assessee or a prescribed person if the entity is an office of the government, public bodies and associations.
- The transactions will have an aggregate value of Rs 50,000 and above.
- The rules for filing are yet to be notified but those who fail to file transactions with an aggregate higher than Rs 50,000 will be penalized under section 271FA and penalties can range up to Rs 100 per day of default.
- Section 285BA(5) states that the tax authorities will give a period of notice to those who have not filed to complete the filing process in a span of no more than 30 days from date of service of notice
- If defaulters have still not filed transactions after tax authorities have given a notice of 30 days, the fine can go up to Rs 500 per day of default effective immediately from date of expiry of notice
- 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 the inaccuracy is detected by the tax authorities they can issue a notice period of 30 days to rectify the transaction reports starting from date of notice
- Failure to rectify renders statement invalid and entity will face consequences akin to not having filed the transaction report. Penalties for failure to rectify inaccuracies resulting from faire to comply with due diligence requirements or deliberate inaccuracy or failure in rectifying inaccuracies within prescribed time limits can attract a penalty to the tune of Rs 50,000
Verification of AIR
When an entity has completed preparing an AIR, they can proceed to check the validity of the AIR before uploading it. Validation of AIR is done by using the AIR File Validation Utility or AIR-FVU. The AIR-FVU is available on the NSDL website and is also available at the TIN-FCs or TIN facilitation centres. The AIR-FVU can be downloaded off the NSDL website and be used to run AIR files through. The installation of the AIR-FVU will be successful only if the computer has Java installed on it. The details on how to use the AIR-FVU and its navigation can be found within the setup readme text or by clicking on the readme icon. When the AIR is run through the tool it will display the status of the file. If there are any errors relating to format of AIR then the AIR-FVU will throw up an error file with the error code and description of the error. The filers then have to keep resolving any errors that are displayed till the file returns error free. When no more errors are present the AIR-FVU will display a “File Validation Successful” message. Upon each run of the AIR-FVU it will generate a file with the same name as the report that was run through it but it will have a different extension. The extension of the files will have .fvu attached to it. This file which has no errors will be the one that will need to be furnished
Frequently Asked Questions about AIR
- Where can one furnish their AIR?
- Are there any charges involved in uploading AIR?
- Can all AIR be uploaded in a single file?
AIR can be furnished at any of the TIN-FCs across the country that are managed by NSDL.
Charges are levied for the number of AIR uploaded by an entity. Number of records uploaded determine the charge. If the number of records are less than 100 then the charge is Rs 38, if the number of records are between 101 and 1000 the charge is RS 178 and number of records exceeding 1000 attract a charge of Rs 578.50.
No. each AIR requires a separate CD or Floppy duly labelled with the details of the filer.