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CBDT partners with SEBI to curb tax evasion


CBDT partners with SEBI to curb tax evasion

The Central Board of Direct Taxes (CBDT), the governing body for income tax and Securities Exchange Board of India (SEBI), the capital market regulator, have joined hands for exchange of information and data. “The MoU marks beginning of new era of cooperation and synergy between SEBI and CBDT,” CBDT said in a release. The CBDT and SEBI partnership would help in the smooth functioning of both organisations.

On 8th July 2020, CBDT and SEBI signed a Memorandum of Understanding (MOU) for the exchange of data. Both these authorities mutually agreed to share data of traders in three ways – request-based exchange, suo moto exchange, automatic exchange. As a part of the MOU, there would be sharing of data and information, maintaining the confidentiality and safe preservation of data.

What will CBDT share with SEBI?

Under the exchange of data, the Income Tax Department would share PAN details, ITR information, and trading transactions with SEBI. Further, CBDT will also share the date of PAN application, father’s name or husband’s name, date of birth, or date of incorporation, photograph, and signature. Further, ITR related information such as mobile, email, address, IP address, financial particulars, bank details, TDS & TCS, and income from trading in securities would also be shared.

In the capital market, stock market manipulation is a widely used fraudulent practice where various entities manipulate the price of stocks by leaking misleading information into the market. With the help of the information shared by IT Department, SEBI can trace such entities and take action against them.

Tax Alert! ITD can now catch you for ignoring trading transactions

The Income Tax Department is working to build a warehouse of information of taxpayers by sourcing data from third parties. The IT Department would be able to fetch details of trading transactions using the data shared by SEBI.

Many investors who trade in equity having negligible profit/loss often ignore transactions and do not report them in the ITR. Earlier, the IT Department did not have details of such trades and thus could not detect such non-disclosure of income.

To trace such taxpayers, the IT department added a new Schedule 112A in the ITR Utility. The taxpayer should report details of LTCG from the sale of equity shares, equity-oriented mutual funds, or unit of business trust on which STT is paid under Section 112A. However, after many objections, the ITD made this trade-wise reporting optional for FY 2018-19 (AY 2019-20). Unfortunately, the ITR Utility for FY 2019-20 has once again made Schedule 112A reporting mandatory.

As a result of the SEBI-CBDT partnership, the IT department now has access to the trading data. It would now keep an eye on tax-evaders by sending out scrutiny notice for non-disclosure of income. On the other hand, the taxpayers should ensure reporting correct information and all their incomes in the Income Tax Return.

On a brighter side, the IT Department can pre-fill data of trading transactions in the ITR making tax filing simplified for traders and investors. As a result, this initiative has been applauded by a large number of taxpayers.

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Got Questions? Ask Away!

  1. Hi Aayushi,

    It is always a good practice to file your ITR and report all your financial transactions to avoid notice from the Income Tax Department. Especially after the SEBI and CBDT’s data partnership. If your total income is below the basic exemption limit, you won’t have any tax liability.

    1. If my income and Short term capital gains combined total are below:

    A. 5 lac (income until which tax is 0 using rebate) do I need to file itr or not mandatory.

    B. For below 2.5 Lac will I be needed to file itr

    In short, if I have stcg but my total income is still below the above 2 scenarios, is itr mandatory. Please tell me about both cases.

    1. Can I file business income tax myself without opting for CA assisted plan which comes when choosing business or profession itr as it includes capital gains and income from freelancing?
  2. Hi @Latesh_Bayad

    A. Yes you need to file ITR since the total income is more than the Basic Exemption limit i.e 2,50,000 INR.
    B. As per the IT Act since your income is less than the Basic Exemption limit i.e 2,50,000 INR it is not mandatory to file ITR. However, irrespective of the income it is mandatory to file ITR for certain income situations. You can refer to the below article:

    Yes, you can file the return on your own if you don’t want to opt for any assisted plan using Quicko DIY platform.

    Hope this helps :slightly_smiling_face:

    1. So if my income is below 2.5L, I would not need to file itr even if that income includes stcg? Or would I.

    2. And the DIY income tax for business and profession would also include the capital gains option?

    3. I heard there’s standard deduction for salaried employees. Is there anything for businesses as well?

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