As the Union Budget has proposed rationalisation of provisions relating to Form 26AS, taxpayers will now get a detailed information statement beyond the tax deducted at source (TDS) such as sale/purchase of immovable property, share transactions, etc. This will help make filing of income tax returns (ITR) easier.
At present, under Section 203AA of the Income Tax Act, the income-tax department delivers Form 26AS to every person, showing details of TDS and other prepaid taxes. The Budget has now proposed to introduce a new Section 285BB that requires it to upload a comprehensive annual information statement in respect of the taxpayer.
“Such statement will also include other financial information such as sale or purchase of immovable property and shares in possession of the income-tax authority. Consequently, Section 203AA will be deleted and Form 26AS will be replaced by the comprehensive annual information statement,” the Finance Bill’s provisions relating to direct taxes notes.
This proposed amendment will be effective from June 1, 2020 and the form and manner of the annual information statement will be prescribed by the government later separately.
Pre-filled ITR forms
In last year’s Budget, finance minister Nirmala Sitharaman had 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.
At present, taxpayers use online portal for tax filings, wherein personal details, Aadhaar number, bank account number and tax-paid information are pre-populated in the tax form. In fact, ITR-1 comes pre-filled with information related to the taxpayer and employer, break-up of the salary into taxable component and TDS through Form 16.
While the electronic form gets automatically populated with tax liability on fixed deposit interest as the bank deducts TDS, an assessee has to fill interest earned on saving account in the ITR as there is no TDS on the same. They also have to calculate long-term and short-term capital gains on sale of stocks, mutual funds and bonds.
Form 26AS is a taxpayer’s tax passbook which shows information on taxes deposited against PAN. It contains details of tax deducted on income by deductors, details of tax collected by collectors, advance tax paid by the taxpayer, self-assessment tax payments, regular assessment tax deposited by the taxpayers, details of refund received by the taxpayer during the financial year, details of annual information report transaction such as high-value transactions in shares, mutual fund, etc. It can be downloaded on the TRACES website or via Net Banking Facility of authorised banks.
Before filing returns, an assessee must make a list of all the details to be filed and cross-check every detail for correct information. Any mismatch between the information that you file and the one which is in Form 16 or Form 26AS will lead to defective filing of ITR. It is therefore very important for a taxpayer to verify the information filled in his tax return himself, and ask questions from the chartered accountant/ advisor, in case of any discrepancy.
After the Budget proposal, depositories, mutual funds and banks will have to tweak their information systems to provide all details to the tax department so that Form 26AS becomes a detailed information statement. Tax experts say fully pre-filled returns will ease taxpayers’ compliance burden and will also help plug revenue.