Income Tax Return Filing: Filing ITR? Make sure to check your latest Form 26AS first — here’s why

By Rama Karmakar

Form 26AS (Annual Tax Statement) is an essential document for taxpayers containing details of all the taxes tagged against a taxpayer’s PAN and serves as an important reference while filing income tax returns (ITR). To usher in enhanced transparency between tax authorities and taxpayers, the Finance Act, 2020 introduced changes to the existing Form 26AS and mandated certain additional information to be included in the new Form 26AS.

Multiple information in respect of a taxpayer, such as sale/ purchase of immovable property, share transactions, etc., is collected by tax authorities from the annual information statements filed by intermediaries such as banks, registrar of immovable property, companies issuing shares, etc. This information is also provided to the taxpayer in Form 26AS so that it can be used for making correct disclosures in the ITR.

Revised Form 26AS

With effect from June 1, 2020, the Central Board of Direct Taxes (CBDT) has revised the Form 26AS to include additional information relating to Specified Financial Transactions (SFT), demands and refunds, completed and pending assessments, etc. The new form is an extension of the earlier version wherein new details will be added to the existing data fields. The ambit of information has been enlarged to cover inputs from various sources so that the taxpayers have a fair idea of the nature of their financial transactions and can refer to these details while filing their income tax return. The updated Form 26AS will consist of the below mentioned information, in addition to the details (such as PAN, address, details of TDS, details of tax collected at source, details of taxes paid during the year) which were already available:

  • Personal details such as, date of birth/ incorporation, mobile number, address, e-mail id
  • SFTs such as donations, forex transactions, acquisition of shares from companies, buy back of shares
  • Tax demands
  • Details of pending and completed assessment proceedings
  • Details of information received from foreign jurisdictions under Exchange of Information (EOI) clause of tax treaties.

The CBDT has issued a press release on July 18, 2020, stating that taxpayers will see an improved Form 26AS which would carry some additional details on taxpayers’ financial transactions as specified in the SFTs in various categories. In fact, SFTs are transactions with specified threshold under the I-T Act and include certain cash transactions, investment in time deposits, purchase of bonds, debentures, shares or mutual funds, payment of credit card bills, purchase of foreign currency, purchase/ sale of immovable property, etc. For example, if you purchased foreign exchange of Rs 10 lakh or more during the financial year, this transaction would appear in your updated Form 26AS. The press release has further clarified that the SFT details available with the tax authorities would be reported in Part E of the new Form 26AS. It would include type of transaction, name of taxpayer who submitted the SFT, date of transaction, single/joint party transaction, number of parties, amount, mode of payment and remarks, etc.

Better disclosure while filing ITR

A lot of information which was otherwise available with the tax authorities will now be available with taxpayers and can be referred to while filing ITR. This will ensure increased compliance and better disclosure while filing returns which would result in reduced litigation and an environment of trust between the taxpayers and the tax authorities.

This will also reduce the element of uncertainty which taxpayers had to face at the time of scrutiny of tax returns and the time spent in scrutiny proceedings. Overall this would bring in further transparency and accountability in tax administration.

The changes in Form 26AS would serve dual purpose as honest taxpayers would be enabled to file accurate ITR with the help of updated information on their financial transactions and it would discourage those who conceal information about specified financial transactions. For example, a person earning foreign income and qualifying as tax resident in India is required to file his ITR, disclosing his foreign income and assets and should therefore file his ITR appropriately by disclosing the income and assets which are required to be reported in India.

As the tax return filing deadline for FY 2019-20 approaches, taxpayers should download their latest Form 26AS, reconcile the numbers and remit taxes as due, before filing ITR.

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