While entering into a high value transaction, you might be asked for your PAN. These transactions are then reported to the income tax department through a mechanism known as Annual Information Return or AIR. For example, when your cash deposits in your bank savings accounts exceed Rs. 10 Lakhs in a year, the bank is required to file your data with the income tax department in a return known as Annual Information Return (AIR) or Statement of Financial Transactions (SFT).
Under Section 285BA of the Income-tax act, 1961, it is mandatory for “specified persons” to report specified transactions as prescribed under Rule 114E of the income tax.
Who are these specified persons that have to file AIR?
The following are classified as “Specified Persons” or “Reporting Person”:
1. Banking Company or cooperative banking institution to which Banking Regulation applies/ Postmaster General of post office
2. Issuer of Credit Card
3. Trustee of a Mutual Fund
4. Company or Institution issuing Bonds or Debentures
5. Company issuing shares through Public or Rights Issue
6. Listed company purchasing its own shares under Section 68 of the Companies Act, 2013
7. Inspector-General appointed under section 3 or Registrar or Sub-Registrar appointed under section 6 of the Registration Act, 1908
8. Authorised person under Section 2(c) of the Foreign Exchange Management Act, 1999
9. Persons liable for audit under Section 44AB of the Income-tax Act, 1961
Nature & value of transactions reported through AIR
1. Cash deposits into savings bank account or into time deposits with a bank
In case the aggregate of cash deposits in savings accounts in a bank or in fixed deposits with a bank exceed Rs. 10 lakhs in a financial year, the bank shall be liable to file AIR with the details of such transactions.
2. Cash purchase of bank drafts or banker’s cheque or pay orders or prepaid instruments issued by the Reserve Bank of India
In case of purchase of bank drafts or banker’s cheque or pay orders or prepaid instruments issued by the Reserve Bank of India in excess of Rs. 10 lakhs during the financial year, the Banking Company or cooperative banking institution to which Banking Regulation applies shall be liable to report the transaction in the AIR.
3. Cash deposits or withdrawals from one or more current accounts of a person
In case of cash deposits or withdrawals in excess of Rs. 50 lakhs, during the financial year, from one or more current accounts belonging to a person, the AIR shall be filed by the Banking Company or cooperative banking institution to which Banking Regulation applies.
4. Credit card payments
In case credit card payments are made through cash in excess of Rs. 1 Lakh or through any other means in excess of Rs. 10 lakhs during the financial year, then the credit card issuing company or the bank, as may be relevant, shall be liable to file the AIR reporting such transaction.
5. Purchase of bonds or debentures
In case purchase of bonds or debentures in excess of a value of Rs. 10 Lakhs is made during the financial year, then the company or institution issuing such bonds or debentures shall be liable to file AIR.
6. Purchase of shares
Purchasing shares of a value exceeding Rs. 10 Lakhs (including share application money), shall make the company issuing such shares liable to report the transaction under AIR.
7. Buyback of shares (other than buying shares in the open market)
If a buyback as per Section 68 of the Companies Act is executed, aggregating to a value in excess of Rs. 10 Lakhs, then the company shall be liable to report the transactions under AIR.
8. Purchasing units of mutual funds
Purchasing units of one or more schemes of mutual funds (excluding transfers from one scheme to the other) shall make the trustee of such mutual fund company liable to report the transactions under the AIR.
9. Purchasing foreign currency
The authorised persons as per Section 2(c) of the Foreign Exchange Management Act, 1999, shall be liable to file AIR, in case foreign exchange currency either in cash or through debit or credit card or prepaid cards or traveller’s cheques or draft or any other instruments is made with them, in the financial year, in excess of Rs. 10 Lakhs.
10. Purchase or sale of immovable property
The Inspector-General appointed under Section 3 of the Registration Act, 1908 or Registrar or Sub-Registrar appointed under section 6 of that Act, shall be liable to report all transactions, having transaction value in excess of Rs. 30 Lakhs under the AIR.
11. Cash receipts for sale, by any person, for goods or services
All persons liable for audit under Section 44AB of the Income-tax Act, 1961, shall be liable to report transactions of cash receipts in a single transaction, in excess of Rs. 2 Lakhs under the AIR.
Due date for filing
The due date for filing AIR is 31 May of the financial year immediately following the financial year in which the transaction is recorded or registered.
 or Statement of Financial Transactions (SFT)? Read this simple post to understand.){kind=link}