A new and comprehensive Annual Information Statement or AIS is going to replace the old Form 26AS very soon. The Budget 2020 has proposed to replace the Form 26AS with a new Annual Information Statement (AIS) that will include details of taxpayers' property, shares possessed and mutual fund transactions along with tax deducted at source (TDS) and TCS information. This will bring transparency and enable the pre-filling of returns and also curb tax evasion.
While presenting the Union Budget for 2019 on 5th July, 2019, the Finance Minister told that pre-filled tax returns will be made available to taxpayers which will contain details of salary income, capital gains from securities, bank interests, and dividends, etc. and tax deductions. Information regarding these incomes will be collected from the concerned sources such as Banks, Stock exchanges, mutual funds, EPFO, State Registration Departments, etc.
For the execution of the same, an amendment is brought in the Income Tax Act, 1961 by Clause 101 of the Finance Bill, 2020 to provide for the facility of providing the information to a taxpayer by the Income Tax Authority.
Clause 101 of the Fiance Bill. 2020 reads as follows-
Annual information statement.
Insertion of new section 285BB.
101. After section 285BA of the Income-tax Act, the following section shall be inserted with effect from the 1st day of June, 2020, namely:––
‘285BB. The prescribed income-tax authority or the person authorised by such authority shall upload in the registered account of the assessee an annual information statement in such form and manner, within such time and alongwith such information, which is in the possession of an income-tax authority, as may be prescribed.
Explanation.––For the purposes of this section, “registered account” means the electronic filing account registered by the assessee in designated portal, that is, the web portal designated as such by the prescribed income-tax authority or the person authorised by such authority.’.
Clause 101 of the Bill seeks to insert a new section 285BB in the Income-tax Act relating to Annual Information Statement so as to provide that the prescribed income-tax authority or the person authorised by such authority shall upload in the registered account of the assessee an annual information statement in such form and manner, within such time and along with such information, which is in the possession of an income-tax authority as may be prescribed.
The provisions related to Form 26AS in the Act have been rationalized.
Section 203AA of the Act, inter-alia, requires the prescribed income-tax authority or the person authorized by such authority referred to in section 200(3), to prepare and deliver a statement in Form 26AS to every person from whose income, the tax has been deducted or in respect of whose income the tax has been paid specifying the amount of tax deducted or paid.
The Form 26AS as prescribed in the Rules, inter-alia, contains the information about tax collected or deducted at source, payment of taxes, income-tax refunds issued.
However, with the advancement in technology and enhancement in the capacity of system, multiple information in respect of a person such as sale/purchase of immovable property, share transactions, etc. are being captured or proposed to be captured.
In future, it is envisaged that in order to facilitate compliance, this information will be provided to the assessee by uploading the same in the registered account of the assessee on the designated portal of the Income-tax Department, so that the same can be used by the assessee for filing of the return of income and calculating his correct tax liability.
As the mandate of Form 26AS would be required to be extended beyond the information about tax deducted, it is proposed to introduce a new section 285BB in the Act regarding Annual Information Statement or AIS.
This section proposes to mandate the prescribed income-tax authority or the person authorized by such authority to upload in the registered account of the assessee a statement in such form and manner and setting forth such information, which is in the possession of an income-tax authority, and within such time, as may be prescribed.
Consequently, section 203AA is proposed to be deleted.
This amendment will take effect from 1st June, 2020.
This means it will be applicable for the returns that will be filed on or after 01-06-2020. The returns for the financial year 2020-21 are required to be filed by 31-07-2020 in case of individuals, HUFs, etc. and by 31-10-2020 for companies, tax audit cases, etc. In the case where the provisions of Transfer Pricing is applicable, the due date to file the return of income is 30-11-2020.
Under the proposed section 285BB, the Central Board of Direct Taxes (CBDT) is required to provide a comprehensive Annual Information Statement that will include details on important financial transactions undertaken by an individual in a particular year like sale or purchase of property, shares, mutual funds, interest income, etc.
The new and comprehensive Annual Information Statement or AIS is yet to be notified by the CBDT. Since it is applicable from 1st June, it is expected that the new system will come in place before that date.
With the introduction of section 285BB, the old Form 26AS will no longer be available and will be replaced by a more comprehensive Annual Information Statement or AIS. This will curb tax evasion, promote transparency and simplify the tax system and the return filing process.
Annual Information Statement or AIS is more comprehensive than the Form 26AS as it will contain more information about financial transactions of taxpayers beyond the TDS and TCS transactions. Presently, only the transactions which suffer TDS or TCS are reported by the deductor and the same gets reflected in Form 26AS. Those financial transactions on which no tax is deducted are not reported in the Form 26AS except those cases for which Form 15G or Form 15H or lower TDS certificate under section 197 are furnished.
Though section 285BA read with Rule 114E requires certain persons to report certain high-value transactions in 'Statement of Financial Transaction' (SFT) to the income tax authority but these are not complete and only a few mandated transactions are reported. Further, the same is not reflected in the taxpayers Form 26AS. Such information cannot be synchronized for computing the income of the taxpayer.
Though the format of the new Annual Information Statement (AIS) is yet to be notified, it has to be seen how the new form is designed and structured to contain all the financial transactions of the taxpayers. But one thing is sure, it will widen the taxpayers base as concealing any income will become difficult.
A taxpayer can access the Annual Information Statement through his income tax e-filing account.
However, there is no provision for confirming the transactions by the reporting entity with the taxpayer before the same is furnished to the income-tax department. In case any reporting entity reports any wrong or incorrect particulars, it will create trouble for the taxpayer.
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