The new Rule 114E(2) of the Income Tax Department on joint bank accounts is causing trouble for account holders. If an amount of more than Rs 10 lakh is deposited in a joint account, then its report is registered on the PAN of all the account holders. In such a situation, housewives or elderly people who do not have their own income can also come under the purview of tax notice.
Rule 114E: People having joint bank accounts may now have to face trouble due to a new rule. Income Tax Department’s Rule 114E(2) says that if an amount of Rs 10 lakh or more is deposited in a joint account, then this entire information will be shown on the PAN of all the account holders. Even if the money is deposited by only one person. Because of this, many times transactions are registered in the name of people who do not have any income and they may get a tax notice.
What is Rule 114E(2)
This rule says that banks, post offices and other financial institutions will have to report deposits or investments of more than Rs 10 lakh to the tax department. The special thing is that the reporting is done on the PAN of all the account holders. Meaning, if the husband and wife have a joint account and only the husband has deposited the money, then also the same amount will be visible on the wife’s PAN.
What kind of problems can arise
Mostly the elderly, housewives or people who do not have their own income but their name has been added in the joint account for convenience, are being affected the most. High value transactions start appearing on the PAN of such people, whereas in reality they have not made any investment or deposit. The result is that the tax department can seek answers from them too.
What is the solution
At present, the department does not have a system that can automatically identify who has made the real investment. For this reason, every account holder should check his annual information i.e. AIS. If the information is appearing wrong in your name, then feedback can be given by telling that it is related to another PAN. Also, it is also important that the related documents are kept safe so that they can be shown to the department when needed.
To whom does this rule apply
This problem is not only applicable to housewives or elderly people but to every joint account holder. Whenever an amount of Rs 10 lakh or more is deposited, it gets registered in all the names. Therefore, it is better to actively check AIS, give correct feedback and if required, file ITR as well.
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