Is Form 26AS a more than your tax details now?

The Journey of Form 26AS from an " Annual Consolidated Tax Statement" to " Annual Information Statement" has been very much interesting providing more than just your tax details. The Central Board Of Direct Taxes on 28th May 2020 released an official notification regarding the updation in Form 26AS, which came into effect on 1st June 2020. The amendment expanded the scope of the Form 26AS beyond the TDS details to all your Financial Transaction of a Financial Year. The new form would curb tax evasion, would improve transparency among the taxpayers and the authorities........and much more, read this article to find out.

Is Form 26AS a more than your tax details now?

Recently on 28th May 2020, the Government brought out a notification on the renewed Form 26AS, which created a buzz among the taxpayer. But before that let us first know what exactly the Form 26AS was for?

Form 26AS or the Annual Consolidated Credit Statement issued under Section 203AA of the Income Tax Act, 1961 was the statement containing comprehensive information about the deductee’s i.e. One from whom tax is deducted such as:

  1. Tax Deducted at Source on his various incomes,
  2. Tax collected at source,
  3. the refund received by him along with the interest on refund,
  4. the advance tax paid and
  5. the details of Annual Information Return

This form serves as a proof for your tax details but there was still lack of details regarding the income of the assesses due to which there were still chances of Misreporting of Income. So with effect from 1st June 2020, old Form 26AS stands withdrawn and a new statement "Annual Information Statement" has been brought out.

What is the Annual Information Statement?         

 

With the power conferred under section 285BB of the Income Tax Act, 1961, in the recent budget of Financial year 2020-21, rule 31AB of the Income Tax Rules, 1962 stands omitted and a new rule 114-I was introduced which has come into effect since 1st June 2020.

 

A better and clear version of Form 26AS ensures more transparency between the taxpayer, the government, and the payee. However, the new "Annual Information Statement" created a bit of uneasiness among the taxpayers……but why and what are the changes involved?

 

As this is the era of internet and digitalization, following fields were added apart from the name, PAN, and address of the assessee:

 

  1. Email ID
  2. Mobile Number, and
  3. Adhaar Card

 

would be displayed ensuring easy communication and tracing of the payer.  Moving towards the further important additions, following points have become the new highlights:

  1. Information related to Specified Financial Transactions: The Financial Transactions reported under section 285BA of the Income Tax Act, 1961 involves the high valued transactions which exceed certain specified monetary limits. Certain transactions with their monetary limits for a Financial Year are as follows:

 

Sr.No.

Transaction

Monetary Limit

1.

Purchase of bank drafts/ Banker’s cheque in cash

₹ 10,00,000.00 or more

2.

Purchase of Prepaid Instruments issued by Reserve Bank Of India

₹ 10,00,000.00 or more

3.

Cash Deposit or Withdrawal in Current Account

₹ 50,00,000.00 or more

4.

Cash Deposit in other than Current Account and Time Deposit

₹ 10,00,000.00 or more

5.

Credit Card Payment

i)                   ₹ 100000.00 or more in cash

ii)                 ₹ 10,00,000.00 other than in cash, raised against one or more Card.

6.

Purchase of Debenture/ Shares/ Buy Back of Shares/ Mutual Funds/Foreign Currency

₹ 10,00,000.00 or more

7.

Purchase/Sale of Immovable Property

₹ 10,00,000.00 or more or

₹ 30,00,000.00 or more valued by the Stamp Valuation Authority under Section 50C of the Income Tax Act, 1961.

8.

Cash Payment for Goods and Services

Exceeding ₹ 200000.00

 

These details were missing from the previous Form 26AS but were reported by the authorities in Form 61A, the availability of the details in the Form would ensure both the Income Tax Authorities, as well as the payee that the correct information has been submitted and the mistakes, can be rectified easily.

 

  1. Information related to pending proceedings and completed proceedings: Assessment of your income is carried out by the various Income Tax Authorities for scrutinizing your Income under Sections which are as follows:

S.no

Sections of the Income Tax Act,1961

Assessment

Details regarding Assessment

1.

143(1)

Intimation for arithmetical error, internal inconsistencies, etc.

It is generally a computerized assessment, where your income in the return is compared with the database available to the Income Tax Department and if there is a mismatch, Intimation is sent.

2.

143(3)

Scrutiny Assessment

Generally, notice under section 143(3) is served when you understate your income, claim an excess loss, or have any unpaid taxes.

3.

144

Best Judgment Assessment

The notice is sent generally in the case when the person fails to furnish his Income Tax Return or fails to comply with terms of notices issued under other sections. After providing assessee with the opportunity of being heard the Income is assessed.

4.

147

Income Escaping Assessment

The notice is sent under the case when the Assessing Officer has the reason to believe that certain income of the assessee has escaped the assessment i.e. has not been taxed for any assessment year, he may, subject to the provisions of sections 148 to 153.

5.

153A

Search and Seizure

Assessment under this section is carried out in the case of Search and Seizure; assessment can be done of income within six years immediately preceding the year of search.

 

The information regarding the same would be available in the Form 26AS, the assessee and the Income Tax Department would know about the disputed amount as well as the amount paid or pending as This would also save time for the authorities as a better selection of returns for scrutiny. And the payee would also be well informed about his dues.

 

  1. Information regarding agreement under section 90 or 90A of the Income Tax Act, 1961: As many of the Indian are send onsite for their various projects, discrepancies regarding payment of taxes are obvious to arise for which there are section 90 and 90A of the Income Tax Act, 1961 which provide relief to the taxpayer when there is DTAA with the country and DTAA with specified associations respectively. This will give clear information to the assessee regarding the relief claimed by him and his foreign income disclosed to the authorities. For example, Mr. A has gone to Europe for employment purpose he would receive his salary in India and Europe as well, and he has already paid his taxes on his Foreign Income and since in case of Resident and Ordinary Resident the global Income is taxable in country where source of income is generated, the person can claim relief for tax paid in Europe and only the balance amount of tax has to be paid in resident country, so the relief claimed details would be available in Form 26AS.

 

  1. Any other information related in the interest of the Revenue: The statement is an open-ended statement where the rest of the source of the income of the assessee can be added for example we could consider the Income from the foreign country not covered under section 90 and 90A so the relief could be claimed under section 91 of the Income Tax Act, 1961. Section 91 of the Income Tax Act, 1961 where there is no Double Taxation Avoidance Agreement between the countries the relief can be claimed on the doubly taxed income. Apart from that as the Form 26AS needs to be updated every 3 months, so the chances of income being missed would be reduced enabling proper reporting of income due to its constant updation.

 

My Views welcoming the move:

 

Though with much more of disclosure in the Form 26AS would make people feel that the privacy regarding Income has been invaded but as being one of the professionals, I would say the changes brought out by the government are welcome changes as this would certainly increase the compliance of the Income Tax Act, 1961 and would also reduce the Income Tax Assessments. The regular updation of form would also ensure that the correct data of the payee has been shown and submitted to the Government. This would also help in easy filing of the Income Tax Returns as all the information along with the tax details would be available at a single place and the payee will also be able to check for the mismatch. The form would be fruitful to the Payer, the Payee, and the Government as well, as in absence of information there are chances where the deductions of tax can be denied and Form 26AS avoids this. Not only the updation would prove useful under the Income Tax Act, 1961 but also under the GST Act 2017, The Benami Law, etc. A complete Financial History of a person for a full year will just be available in a single form.  

          

 

My suggestions for further improvement:

Certain other points like the travel history of a person outside India can also be added, giving clear cut clarity for the person in defining his Residential status the condition for which being that the person Resides in India for a minimum of 182 days in a year. The details of property received due to the Law of Inheritance giving a much easier computation of Income.

 

The original notification by the Income Tax Department can be viewed here

 

 

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