Chennai based distributor association IFA Galaxy has requested AMFI to approach the Finance Ministry to tweak Section 285 BA of the Income Tax Act, 1961. Under this rule, fund houses are required to send details of investment transactions exceeding Rs. 2 lakh to the income tax authorities. This data is sent by fund houses to NSDL which shares the data with tax authorities.
“Some retired persons hesitate to invest their pension money in mutual funds due to fear of getting tax notice. The rule was set long ago and needs to be revised. Some investors have received notices even if they switch from one scheme to another. The joint holder also gets a notice. AMFI is expected to take up the matter with the Finance Ministry,” says A K Narayan, President, IFA Galaxy.
To keep a watch on high value transactions, the Income-tax Law has framed the concept of statement of financial transaction or reportable account (previously called as ‘Annual Information Return (AIR)’.
AIR reporting criteria
“Investing Rs. 2 lakh in mutual funds is not the only reason why a client would get notice from Income Tax department. The Form 26 gives a lot of information to the tax authorities. They send a notice if they find any glaring discrepancy in your investment activity,” says Suresh Sadagopan of Ladder 7 Financial Advisories.
Fund officials say that this Rs. 2 lakh limit should be increased. “There was a discussion on this in AMFI. Considering inflation, the limit should be increased. However, not all investors get notices. The tax authorities send notices if find that you are investing disproportionate amount of money which is not commensurate with your income,” said the sales head of a public sector fund house.
Let us know your views.
