Obligation to furnish statement of financial transaction or reportable account.
508(1)
Any person, being—
- (a) an assessee; or
- (b) the prescribed person, in the case of an office of Government; or
- (c) a local authority or other public body or association; or
- (d) the Registrar or Sub-Registrar appointed under section 6 of the Registration Act, 1908; or
- (e) the registering authority empowered to register motor vehicles under Chapter IV of the Motor Vehicles Act, 1988; or
- (f) the Director General as referred to in section 2(a) of the Post Office Act, 2023; or
- (g) the Collector referred to in section 3(g) of the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013; or
- (h) the recognised stock exchange referred to in section 2(f) of the Securities Contracts (Regulation) Act, 1956; or
- (i) an officer of the Reserve Bank of India, constituted under section 3 of the Reserve Bank of India Act, 1934; or
- (j) a depository referred to in section 2(1)(e) of the Depositories Act, 1996; or
- (k) a prescribed reporting financial institution; or
- (l) any other person, as prescribed, who is responsible for registering, or, maintaining books of account or other document containing a record of any specified financial transaction or any reportable account, as prescribed, under any law in force, shall furnish a statement regarding such specified financial transaction or such reportable account, which is registered or recorded or maintained by him and information relating to which is relevant and required for this Act, to the income-tax authority or such other authority or agency, as prescribed.
508(2)
The statement referred to in sub-section (1) shall be furnished for such period, within such time and in the form and manner, as prescribed.
508(3)
In sub-section (1), “specified financial transaction” means any transaction—
- (a) of purchase, sale or exchange of goods or property or right or interest in a property; or
- (b) for rendering any service; or
- (c) under a works contract; or
- (d) by way of an investment made or an expenditure incurred; or
- (e) for taking or accepting any loan or deposit, as prescribed.
508(4)
The Board may prescribe different values for different transactions specified in sub-section (3) for different persons having regard to the nature of such transaction.
508(5)
If the prescribed income-tax authority finds a defect in the statement furnished under sub-section (1), he may intimate the defect to the person furnishing such statement, to rectify the defect within thirty days from the date of such intimation, and at his discretion, extend the said period upon an application made for this purpose.
508(6)
If the defect mentioned in sub-section (5) remains unrectified within the initial period of thirty days or extended period as applicable, then, the provisions of this Act shall apply as if such person had furnished inaccurate information in the statement, irrespective of anything contained in any other provision of this Act.
508(7)
If a person required to furnish a statement under sub-section (1) fails to do so within the specified time, the prescribed income-tax authority may serve upon such person a notice requiring him to furnish such statement, within a period not exceeding thirty days from the date of service of notice, and he shall furnish the statement within the time specified therein.
508(8)
If a person, having furnished a statement under sub-section (1), or in pursuance of a notice issued under sub-section (7), becomes aware of any inaccuracy in the information provided, he shall within ten days, inform the prescribed income-tax authority or other authority or agency referred to in sub-section (1), of the inaccuracy and furnish the correct information in such manner, as prescribed.
508(9)
The Central Government may, specify by rules,—
- (a) the persons referred to in sub-section (1) to be registered with the prescribed income-tax authority;
- (b) the nature of information and the manner in which such information shall be maintained by the persons referred to in clause (a); and
- (c) the due diligence to be carried out by the persons for the identification of any reportable account referred to in sub-section (1).
Section Summary:
Section 508 of the new income tax law mandates specific individuals and entities to furnish statements of financial transactions or reportable accounts to the income-tax authorities. This section applies to a wide range of entities, including assessees, government offices, local authorities, registrars, stock exchanges, financial institutions, and others who maintain records of specified financial transactions. The purpose is to ensure transparency and compliance by requiring the reporting of relevant financial information.
Key Changes:
- Expanded Scope of Reporting Entities: The section now includes a broader list of entities responsible for reporting, such as registrars, stock exchanges, and financial institutions, which were not explicitly covered under the previous law.
- Definition of Specified Financial Transactions: The law now clearly defines what constitutes a "specified financial transaction," including purchases, sales, services, investments, loans, and deposits.
- Defect Rectification Process: A formal process for rectifying defects in furnished statements has been introduced, with a 30-day window for correction and provisions for extensions.
- Penalties for Non-Compliance: Failure to rectify defects or furnish statements on time can lead to penalties, treating the omission as furnishing inaccurate information.
Practical Implications:
- For Taxpayers and Entities: Entities listed in the section must now ensure they maintain accurate records of specified financial transactions and report them in the prescribed format and timeline. This increases compliance obligations.
- For Income-Tax Authorities: The law provides a structured process for identifying and rectifying errors in statements, improving the accuracy of financial data collected.
- For Financial Institutions and Registrars: These entities must now register with the income-tax authority and follow due diligence procedures to identify reportable accounts.
Critical Concepts:
- Specified Financial Transaction: Defined as transactions involving the purchase, sale, or exchange of goods, property, services, investments, loans, or deposits. The Central Board of Direct Taxes (CBDT) may prescribe different values for different transactions.
- Reportable Account: An account or transaction that must be reported to the income-tax authority as per the prescribed rules.
- Defect Rectification: If a statement contains errors, the taxpayer or entity has 30 days (extendable upon request) to correct the defect. Failure to do so may result in penalties.
Compliance Steps:
- Identify Reportable Transactions: Entities must identify transactions that fall under the definition of "specified financial transactions."
- Maintain Records: Ensure accurate and complete records of these transactions.
- Furnish Statements: Submit the required statements to the income-tax authority within the prescribed time and format.
- Rectify Defects: If notified of defects, correct them within 30 days (or the extended period).
- Update Information: If inaccuracies are discovered after submission, inform the authority within 10 days and provide corrected information.
Examples:
- Example 1: A stock exchange must report all transactions involving the purchase or sale of securities by investors. If the exchange fails to submit the statement on time, it may receive a notice from the income-tax authority and must comply within 30 days.
- Example 2: A registrar responsible for property registrations must report all property transactions exceeding a prescribed value. If the registrar submits a statement with errors, they must rectify the defects within 30 days to avoid penalties.
- Example 3: A financial institution identifies a reportable account for a high-net-worth individual. It must perform due diligence, maintain records, and submit the required statement to the income-tax authority.
This section enhances transparency and accountability by ensuring that all relevant financial transactions are reported and monitored effectively.