Is it mandatory to disclose all Bank Accounts in Income Tax Returns?

Is it mandatory to disclose all Bank Accounts in Income Tax Returns?

Introduction

An income tax return (ITR) is basically a document that is filed as per the provisions of the Income Tax Act, reporting one’s income, profits and losses and other deductions as well as details about tax refund or tax liability. From AY 2015-16, it has become mandatory for the taxpayers to provide the details of all the bank accounts held by them in India including the accounts with joint names.  

Bank statements are statements which detail the transactions in the bank account of an individual or organization. They must be accurate and clear in order to be authentic and valuable. Bank statements are issued for certain period of time, that is, they often display the transactions in a bank account for a month, or so.

Bank statements can also cover the credit card transaction of an individual who possesses the credit card of a particular bank. A bank statement can be used in case of any misunderstanding or financial mismanagement. It serves as documentary evidence in such cases.

A bank statement calls attention to the financial status of a company or an individual. It is often used to judge an individual or a company’s worth or standing as well as for purposes of business. It is an indicator of a company’s suitability in many cases.

CBDT has vide Notification No. 41/2015, dated-15^th April, 2015 notified  ITR-1 ITR-2 ITR-4S ITR-V for A.Y. 2015-16 with several changes. In such ITRs, CBDT had for the first time required an assessee to compulsorily provide details of all bank accounts held in India (including in joint names) at any time during the financial year including details of those which were closed during the year.

The following information will be required to be furnished with respect to bank accounts held in India:-

1. Bank name
2. Bank account number
3. Type of account-savings or current
4. IFS code of the bank
5. Number of bank accounts held in India (including opened/closed) during the previous year
6. Names of Joint holders, if any
7. Details of Dormant bank accounts (which are in-operational since last 3 years) are not required to be disclosed.
8. Account balance as on 31^st March of the previous year. In case the account is closed during the year, in the column for account balance as on 31st March mention “closed”.

All these disclosures are mandatory; one should not forget to miss the same. While filing Income tax returns, one should make sure they have all these bank details ready with them.

Details of OD account and FD Accounts are not required to be given and also there is no need to submit details of Joint Account holders (Name, PAN etc). It is not compulsory to provide details of accounts which are dormant. For this purpose any accounts which have been non operational for the past 3 years are considered as dormant.

Do NRI need to disclose foreign bank account information in tax returns?

There has been lot of confusion among various NRI’s regarding the disclosure of their overseas accounts in the tax return in India. The Income Tax department in a press release on 24th July,2017 clarified this issue.

It is not mandatory for NRI to disclose the detail of their overseas bank accounts while filing return in India. In case of refund, they should mention the bank account held by them in India.

It is only in case when they do not have bank account in India and they have to claim refund, then they can mention the detail of their foreign bank account to get the credit of such refund.

Therefore, the NRIs who are not claiming refund or who are claiming refund but having a bank account in India are not required to furnish details of their foreign bank account in the return of income. NRI needs to disclose all their NRO accounts and NRE Accounts held in India. The interest income from NRE accounts to be disclosed in Income Tax Returns as exempt income

What will happen if someone does not report their bank account details?

There is no defined specific provision in the Income Tax Act that tells us what will happen in case of non-reporting of bank accounts in ITR. If any interest income is earned from those bank accounts, then the taxpayer has to report it in their ITR.

Non-reporting of interest incomes can attract penalties for under-reporting and misreporting of incomes by the assessing officer. Income tax laws require a taxpayer to provide complete and full information. If a taxpayer has failed to provide information about all the bank accounts held by them, then in that case, the ITR can be treated as a defective return.

AO will send a notice informing that your ITR is defective and rectify the same within the time period as mentioned in the notice. If the AO has reasons to believe that any income chargeable to tax has escaped assessment for any assessment year, he may subject to the provisions of Sec 148 to 153, assess or reassess such income and also any other income chargeable to tax which comes to his notice subsequently in the course of proceedings.

Penalty for Undisclosed Income

Where the income determined includes undisclosed income, a penalty @10% is payable. However, no such penalty will be leviable, if such income was included in the return and tax was paid before the end of the relevant previous year.

Is any procedure available if taxpayer had already filed ITR but forgot to provide any bank details

The taxpayers that have already filed and verified their ITR but have not provided their bank details, have the option to rectify their mistake by filing a revised return.

A revised return can be filed anytime before the completion of assessment year or assessment, whichever is earlier. Even if the ITR is processed by the tax department, then also the taxpayer should file a revised return if they have any additional income to report.

It is always considered a prudent action to file one’s proper income tax return on time. More than any other benefit, being on the right side of law helps. It is recommended to keep the income tax department informed about one’s income and taxability. This communication is only possible when one files their ITR correctly.

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