Income tax notice
Recently Prosperr.io’s tax expert O.P. Yadav has brought an important issue to everyone. He explained on LinkedIn how the joint account holders are getting unnecessary income tax notices due to Rule 114E (2), that too when they do not do any transaction themselves.
According to Income Tax Rule 114E (2), banks and other financial institutions have to give information about certain transactions to the Income Tax Department. For example, if someone deposited 10 lakh rupees or more in the bank in a year, then its information is given to the department. Now the problem starts when this account is a joint account.
Where is the problem happening?
O.P. Yadav told LinkedIn that when there is a big transaction in the joint account (eg ₹ 10 lakh FD), the bank sends the information about that entire amount to the Income Tax Department in the name of both account holders. Whether only one person has deposited the money, that transaction is seen in the records of both.
This happens that an entry of Rs 10 lakh comes in the AIS (annual information statement) of both account holders. While in reality, only one has deposited the money, but it is seen that both did it. In such a situation, another person also gets income tax notice.
Can AIS be improved?
By going to AIS (Annual Information State), you can give feedback that you have not done this transaction. But O.P. “Despite clarifying on AIS that he has not done the transaction, his answers are rejected by the reporting unit citing Rule 114E (2),” says Yadav. This means your feedback is not valid and then you can get notice under Section 148A (Re-Assessment) or Section 133 (6) (e-verification).
What to do joint account holders?
To avoid this problem, joint accounts holders should regularly check AIS. In such a situation, if you see any wrong entry related to the transaction, then enter the feedback immediately. Despite this, if the notice comes, do not panic, answer with the correct documents and take advice from chartered accountant or tax experts.