CBDT Amends Rule 114E to Report Capital Gains, Interest and Dividend Income for Pre-filling Return

CBDT vide Notification No. 16/2021 dated 12.03.2021 and Income-tax (4th Amendment) Rules, 2021 amends Income Tax Rule 114E read with Section 285BA of the Income Tax Act, 1961 requiring companies, depositories, post offices and other agencies to report capital gains on transfer of listed securities or units of Mutual Funds, dividend income and interest income for the purpose of pre-filling the return of income.

Section 285BA and Rule 114E deal with the filing of Statement of Financial Translations (SFT) in Form 61A by various persons. Section 285BA was further amended in 2019 by the Finance (No. 2) Act, 2019. The amendment was carried out in order to enable pre-filling of return of income, It was also intended to obtain information by widening the scope of furnishing of statement of financial transactions by mandating furnishing of statement by certain prescribed persons other than those who are currently furnishing the same.

While presenting the Union Budget, 2021 on 1st Feb., 2021, the Finance Minister announced for pre-filling of returns in order to ease the filing of returns. The Budget proposes that details of capital gains from listed securities, dividend income and interest from banks, post office etc. will also be pre-filled in returns. Details of salary income, tax payment, TDS etc already come pre-filled in returns.

Read Also:

A Guide to Section 285BA and Rule 114E on Statement of Financial Translations (SFT) in Form 61A

Prior to 2019, there was a restriction on reporting of specified financial transactions where aggregate value does not exceed Rs. 50,000 in a financial year. This restriction has been removed by Finance (No. 2) Act, 2019. 

Presently, the statement of financial transaction shall be filed in Form 61A electronically on the e-filing portal of the Income Tax Department. With effect from 9th April 2018, registration, statement upload and all other facilities for Form No. 61A has been migrated from e-filing portal to the “Reporting Portal” (https://report.insight.gov.in).

The following changes or amendments in Rule 114E notified by Income-tax (4th Amendment) Rules, 2021:

1. Act No. of the Reserve Bank of India Act, 1934 is corrected from (6 of 1934) to (2 of 1934).

2. A New Sub-Rule (5A) is inserted in Rule 114E to provide for reporting the following incomes by the specified reporting persons -

Sl No	Income/Transaction	Specified Reporting Persons
1.	Capital gains on transfer of listed securities or units of Mutual Funds	(i) Recognised Stock Exchange (ii) A Depository (iii) Recognised Clearing Corporation (iv) Registrar of Shares.
2.	Dividend Income	A Company
3.	Interest Income	(i) A banking company or a co-operative bank (ii) Post Master General (iii) Non-banking financial company which holds a certificate of registration under section 45-IA of the Reserve Bank of India Act, 1934 (2 of 1934), to hold or accept deposit from public.

3. The following expressions have been defined in the amended Rule-

(a) "listed securities" means the securities which are listed on any recognised stock exchange in India; 

(b) "Mutual Fund" means a Mutual Fund as referred to in clause (23D) of section 10 of the Act; 

(c) "recognised clearing corporation" shall have the same meaning as assigned to it in clause (o) of sub-regulation (1) of regulation 2 of the Securities Contracts (Regulation) (Stock Exchanges and Clearing Corporations) Regulations, 2012 made under the Securities Contracts (Regulation) Act, 1956 (42 of 1956) and the Securities and Exchange Board of India Act, 1992 (15 of 1992); 

(d) ―recognised stock exchange‖ shall have the same meaning as assigned to it in clause (f) of section 2 of the Securities Contracts (Regulation) Act, 1956 (42 of 1956); 

(e) "securities" shall have the same meaning as assigned to it in clause (h) of section 2 of the Securities Contracts (Regulation) Act, 1956 (42 of 1956);‖

4. The reference of the new sub-rule (5A) as inserted above is added in sub-rule (6).

5. Principal Director General of Income Tax (Systems) or the Director-General of Income Tax (Systems) with the approval of the Board will specify the-

Form

Time Limit or due date

Frequency, and

Manner

in which the statement needs to furnished by the reporting persons.

Read the full text of Notification 16/2021 dated 12.03.2021 on Reporting Capital Gains, Interest and Dividend Income

MINISTRY OF FINANCE

(Department of Revenue)

(CENTRAL BOARD OF DIRECT TAXES)

NOTIFICATION

 

New Delhi, the 12th March, 2021

G.S.R 175(E).—In exercise of the powers conferred by section 285BA read with section 295 of the Income-tax Act, 1961 (43 of 1961), the Central Board of Direct Taxes hereby makes the following rules further to amend Income-tax Rules, 1962, namely:-

1. Short title and commencement. - (1) These rules may be called the Income-tax (4th Amendment) Rules, 2021.

(2) They shall come into force from the date of its publication in the Official Gazette.

2. In the Income-tax Rules, 1962, in rule 114E,–

(A) in sub-rule (2), in the TABLE, in serial number 3, in column (3), in item (iv), for the brackets, figures and word ―(6 of 1934)‖, the brackets, figures and word ―(2 of 1934)‖ shall be substituted;

(B) after sub-rule (5), the following sub-rule shall be inserted, namely:—

"(5A) For the purposes of pre-filling the return of income, a statement of financial transaction under subsection (1) of section 285BA of the Act containing information relating to capital gains on transfer of listed securities or units of Mutual Funds, dividend income, and interest income mentioned in column (2) of Table below shall be furnished by the persons mentioned in column (3) of the said Table in such form, at such frequency, and in such manner, as may be specified by the Principal Director General of Income Tax (Systems) or the Director General of Income Tax (Systems), as the case may be, with the approval of the Board, namely:—

Sl No.	Nature of Transaction	Class of person (reporting person)
(1)	(2)	(3)
1.	Capital gains on transfer of listed securities or units of Mutual Funds	(i) Recognised Stock Exchange; (ii) depository as defined in clause (e) of sub-section (1) of section 2 of the Depositories Act, 1996 (22 of 1996); (iii) Recognised Clearing Corporation; (iv) Registrar to an issue and share transfer agent registered under subsection (1) section 12 of the Securities and Exchange Board of India Act, 1992 (15 of 1992).
2.	Dividend Income	A Company
3.	Interest income	(i) A banking company or a co-operative bank to which the Banking Regulation Act, 1949 (10 of 1949) applies (including any bank or banking institution referred to in section 51 of that Act); (ii) Post Master General as referred to in clause (j) of section 2 of the Indian Post Office Act, 1898 (6 of 1898). (iii) Non-banking financial company which holds a certificate of registration under section 45-IA of the Reserve Bank of India Act, 1934 (2 of 1934), to hold or accept deposit from public.

Explanation. — For the purposes of this rule,—

(a) "listed securities" means the securities which are listed on any recognised stock exchange in India;

(b) "Mutual Fund" means a Mutual Fund as referred to in clause (23D) of section 10 of the Act;

(c) "recognised clearing corporation" shall have the same meaning as assigned to it in clause (o) of sub-regulation (1) of regulation 2 of the Securities Contracts (Regulation) (Stock Exchanges and Clearing Corporations) Regulations, 2012 made under the Securities Contracts (Regulation) Act, 1956 (42 of 1956) and the Securities and Exchange Board of India Act, 1992 (15 of 1992);

(d) “recognised stock exchange‖ shall have the same meaning as assigned to it in clause (f) of section 2 of the Securities Contracts (Regulation) Act, 1956 (42 of 1956);

(e) "securities" shall have the same meaning as assigned to it in clause (h) of section 2 of the Securities Contracts (Regulation) Act, 1956 (42 of 1956);‖

(C) in sub-rule (6),—

(i) in clause (a), after the words, brackets and figures ―column (3) of the Table under sub-rule (2)‖, the words, brackets, figures and letter ―and column (3) of the Table under sub-rule (5A)‖ shall be inserted;

(ii) in clause (b), after the words, brackets and figures ―column (3) of the Table under sub-rule (2)‖, the words, brackets, figures and letter ―and column (3) of the Table under sub-rule (5A)‖ shall be inserted;

(iii) in Explanation 2, after the words, brackets and figures ―Table in sub-rule (2)‖, the words, brackets, figures and letter ―and in sub-rule (5A)‖ shall be inserted;

(iv) in Explanation 3, after the words, brackets and figures ―Table in sub-rule (2)‖, the words, brackets, figures and letter ―and in sub-rule (5A)‖ shall be inserted;

(D) in sub-rule (7), after the words, brackets and figures ―referred to in sub-rule (1)‖, the words, brackets, figures and letter ―and sub-rule (5A)‖ shall be inserted.

[Notification No. 16/2021] [F.No. 370142/03/2021-TPL]

SHEFALI SINGH, Under Secy., Tax Policy and Legislation

Note:- The principal rules were published vide notification S.O. 969 (E), dated the 26th March, 1962 and last amended vide notification GSR No. 170(E), dated the 11th March, 2021.

Download CBDT Notification 16/2021 dated 12.03.2021 on Reporting Capital Gains, Interest and Dividend Income in pdf format

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