Explained: What is new in the Income Tax Form 26AS?

In a move that will enhance the flow of information between taxpayers and tax authorities, the Income Tax Department has launched a revised Form 26AS or Annual Information Statement from this assessment year, which will reflect details of all high-value transactions.

Since the details of high-value transactions will now be reflected to the taxpayers in the new form as against the tax department earlier receiving information from financial institutions and then acting upon it, there would now be a greater onus on taxpayers to comply in a voluntary manner.

What is Form 26AS?

Form 26AS is a consolidated annual tax statement that includes information on tax deducted/collected at source, advance tax, self-assessment that is available on the Income Tax website against a taxpayer’s Permanent Account Number (PAN)

The Budget for 2020-21 had announced the revised Form 26AS giving a more comprehensive profile of the taxpayer going beyond the details of tax collected and deducted at source.

In May, the Income Tax Department notified the new annual information statement in Form 26AS, effective June 1. Going beyond the details of tax deducted or collected at source, the revised Form 26AS will reflect all details provided by banks and financial institutions, which were earlier recorded in their Statement of Financial Transactions (SFTs).

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The Central Board of Direct Taxes (CBDT) in a statement said the Income Tax Department used to receive information like cash deposit/withdrawal from saving bank accounts, sale/purchase of immovable property, time deposits, credit card payments, purchase of shares, debentures, foreign currency, mutual funds, buyback of shares, cash payment for goods and services, etc. under Section 285BA of Income-tax Act, 1961 from “specified persons” like banks, mutual funds, institutions issuing bonds and registrars or sub-registrars etc., with regard to individuals having high-value financial transactions since the financial year 2016.

“Now, all such information under different SFTs will be shown in the new Form 26AS,” it said.

As per Section 285BA of the Income-tax Act, filers are required to furnish a Statement of Financial Transaction for specified transactions during the financial year to the income-tax authority or such other prescribed authority.

Banks and other prescribed reporting financial institutions in their SFTs record details of transactions involving cash deposits aggregating to Rs 10 lakh or more in a financial year, in one or more accounts (other than a current account and time deposit), cash payments made by any person totalling over Rs 1 lakh, payments of bills for one or more credit card of Rs 10 lakh or more by a person in a financial year.

Also, investment in bond/debentures, shares, mutual funds, buyback of shares exceeding Rs 10 lakh in a financial year along with purchase or sale of immovable property for Rs 30 lakh and above by a person will be recorded in the SFTs.

What is the road ahead from here onward?

The tax department will now move towards providing more auto-filled details of financial transactions in the income tax returns (ITRs). For example, as of now, Form 26AS will reflect details of sale/purchase of a property but with auto-filled details in ITRs, the taxpayer will be able to see an approximate amount of tax as per the relevant tax rate.

“As we go further, all information will be collected and given at one place. As a common taxpayer, any economic activity which results in any profit, if it’s available at one place, then it will stay in my mind during return filing. It’s like a tick box, one can keep ticking this is correct or this is incorrect and needs to be changed. It will facilitate correct filing of return and when the correct filing is done, correct taxes get paid. And once the correct taxes are paid, where is the question of any scrutiny. Scrutiny will only come for the mismatch. And if it comes as well, so then it can be explained in this manner. This will also result in lesser litigation since disputes will be reduced,” CBDT Chairman PC Mody told The Indian Express

.This was also mentioned in last year’s Budget presented in July, where Finance Minister Nirmala Sitharaman said that pre-filled ITRs will be made available to taxpayers which will contain details of salary income, capital gains from securities, bank interests, dividends, etc., and tax deductions that will make the filing of accurate tax returns simple. Information regarding incomes and TDS will be collected from banks, stock exchanges, mutual funds, EPFO, state registration departments, etc.