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Stockbrokers can ask you to submit income tax returns (ITR) to check PMLA violation; may lead to jail up to 7 years if guilty
Income tax return: Stockbrokers can also ask for your ITR even if you gave one during the time of account opening. ?Tejas Khoday from FYERS say: "Generally, brokers don't ask for ITRs once an account is active. However, exceptions exist. For instance, if there's any unusual activity in the client's account or a potential mismatch between declared income and trading volumes, brokers may request an update to the client's declared income range."
While your income tax returns (ITRs) are not usually asked by stockbrokers during account opening process, they may ask it in certain circumstances. Securities Exchange Board of India (SEBI) has asked stockbrokers to verify their customer's trades and make sure that there is no money laundering.
Asking for ITR copy is one of the ways to verify whether a person has the means to execute the trades and is not laundering money for someone else. For example: a person with Rs 6 lakh annual salary is taking Rs 50 lakh exposure in Bank Nifty monthly expiry option, this entire trade is a huge red flag hence it needs to be investigated.
Do all stockbrokers ask for a copy of ITR at the time of account opening?
Experts said, every stockbroker will ask for a copy of ITR if anybody is opening a derivative (future and options) and commodity account.
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