Banks to report every penny paid as interest to depositor – The Hindu BusinessLine

Clipped from: https://www.thehindubusinessline.com/economy/banks-to-report-every-penny-earned-as-interest/article66365465.ece

The move will help in widening the tax base and plug the leakages, said experts

The limit earlier was set at ₹5,000 per person per financial year | Photo Credit: Yutthana Gaetgeaw

The Income Tax department has notified that effective January 5, each bank, financial institution and post office has to report every rupee of interest paid to a depositor. “The information is to be reported for all account/deposit holders where any interest exceeds zero per account in the financial year, excluding Jan Dhan accounts,” said the notification.

The limit earlier was set at ₹5,000 per person per financial year. The move will help in widening the tax base and plug the leakages, said experts.

However, this amendment will not have any impact on the exemption available under Section 80TTA and Section 80TTB of the Income Tax Act. An individual (aged less than 60 years) or HUF can claim exemption of interest income up to ₹10,000 from savings account only under section 80TTA. Section 80TTB is for senior citizens and exemption is available from interest income upto ₹50,000 from all kinds of accounts.

‘Systemic change’

Bijal Ajinkya, Partner with Khaitan & Co., said this removal of limit will result in complete reporting of any interest income and the taxpayers earning any interest income will need to be more careful while filing their returns to avoid any mismatch in their annual information statement (AIS) with regard to tax return and notices from the tax department.

“This will lead to a systemic change where the tax department, through their IT systems, will have full information of interest income received by a taxpayer and hence, would lead to a lower chance of a tax leakage/evasion,” she said.

Rahul Charkha, Partner with Economic Laws Practice, said because of the threshold prescribed earlier, in case of taxpayers who earned interest income from multiple accounts, aggregate interest income exceeding ₹5,000 remained unreported in pre-filled returns. “The amendment will smoothen the interest reporting process for taxpayers and avoid revenue leakage for the department,” he said.

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