What is new in Form 26AS and how it impacts taxpayers

Form 26AS was initially introduced as a tax credit statement, containing details of taxes deducted from the income of taxpayers (TDS/ TCS), advance tax or any self-assessment tax paid by the taxpayers or income tax refund received during the financial year.

The Budget 2020 proposed to extend the mandate of Form 26AS and make it more comprehensive, with detailed information about the taxpayer’s tax profile. Consequently, the tax department, in May last year, updated Form 26AS to provide details of pending/ completed income tax proceedings, status of income tax demand and refund along with details of specified financial transactions undertaken by taxpayer during a financial year (such as share purchase, property purchase), etc. to the taxpayers in a single form.

New additions

Once more, the scope of Form 26AS, also known as Annual Information Statement (AIS), has been expanded to incorporate 8 new particulars, including foreign remittances, interest on income tax refund, off-market transactions, dividend income/ purchase of mutual funds, detailed breakup of salary and information from Income Tax Return (ITR) of another person.

Notably, such information was already being captured by the tax authorities from authorised dealers, registrar, depositories, transfer agents etc. For instance, every authorized dealer making a payment to a non-resident is required to furnish statement of such payments in Form 15CC to the tax department. Likewise, depositories and transfer agents are obligated to report off-market transactions of account holders, which may include legacy transfers, gifts, transfer of shares between two demat accounts, shifting of securities between a client and a sub-broker and transactions in unlisted securities.

Tax authorities also get information about financial transactions of persons by way of declarations in other taxpayers’ ITRs. For instance, seller of a property is required to furnish particulars of buyer. Such information obtained from the ITR of another person shall be made available in the revised AIS. Additionally, complete break up of salary including allowances, deductions/ exemptions claimed, their income from other sources and house property and the final tax liability so deduced by the employer shall also form a part of AIS. For the time being, the AIS shall be accessible on the e-filing portal as well as the TRACES portal.

Implications and benefits

The additions to the information list will help both taxpayers as well as tax authorities in assessing a taxpayers’ data and effectuate better flow of information between taxpayer and tax department.

For taxpayers, the collation of almost all tax-related information/reportable transactions at one place will accelerate and facilitate ease while filing income tax returns.

Further, the revised form shall also be of significance for stakeholders such as banks/financial institutions/customers/buyers while exercising due diligence and ensuring the credibility of the corporate/person they are dealing with.

It shall also help taxpayers identify any errors or inaccuracies, if any, and take timely remedial action. Notably, this time a facility of feedback has been instituted, where taxpayers may report any incorrect particulars noticed in Form 26AS.

The reported value and value after feedback shall be shown separately in the AIS. The reporting entity (like the depositories, authorised dealers, etc.) may be contacted if the request is denied. Moreover, a simplified Taxpayer Information Summary (TIS) shall also be made available to the taxpayers, which shall derive information from the taxpayer’s feedback and shall be used for pre-filling of ITRs. Simply put, taxpayers may review AIS and provide feedback if the information reflected therein needs modification. This shall lead to real time changes in the TIS, which may be used for filing the ITR. This is in line with the department’s commitments in the Taxpayers’ Charter, to treat the taxpayers as ‘honest’ unless there is a reason to believe otherwise.

Tax base widens

The government recognises the fact that tax disputes and assessments infuse fear in the minds of the taxpayers. It has therefore been trying relentlessly to simplify tax procedures and build a taxpayer-friendly tax regime.

Facilitating tracking of transactional and tax information at the state of reporting stage itself, shall help minimise incongruities/ omissions, which is a prime reason for scrutiny assessments and shall lead to saving of time, costs and hassle at the assessment stage. With knowledge of the fact that the taxman already has information about the taxpayers, they shall be discouraged to suppress material information, thereby widening the tax base.

Since the inception of the scheme of ‘Transparent Taxation’ the tax department has taken commendable steps like simplification of ITR forms, faster processing of refunds, reduction of unnecessary litigation, etc.

The availability of complete and accurate information for fulfilling compliance obligations under law, adds strength to the government’s efforts of providing a seamless, painless and faceless tax administration.

The author is Director, Nangia Andersen LLP (with inputs from Vasudha Arora)

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