Error while filing your tax return can result in either overpayment or underpayment. Whichever is the case, neither of these situations is desirable. If your overall tax return claim exceeds the total amount of tax paid by you, it can invite scrutiny from the IT department. Not a very welcoming situation, right? You can now reduce chances of error in your ITR filing by taking advantage of the newly notified Form 26AS.
With the help of the Form 26AS, you can now compare all the tax paid by you against the refund claimed to eliminate any disparity. The new form will bring clarity over high-value transactions and omit ambiguous transactions. It came as aftermath where some taxpayers were reported to transact over SFT (specified financial statements) threshold as reported by entities such as banks, mutual funds, bond issuers, registrars and like. The new form will contain more details than the earlier one, including details on high-value transactions reported by ‘specified person’ on SFT filed with the IT department as described u/s 285BA of the IT Act, 1961. It will add more transparency to the system as transactions above the threshold will be visible to the taxpayers.
Under the changed system, taxpayers can compare if the financial transactions undertaken by them are in line with the income reported before filing the ITR for the financial year.
With the new norms, the government is expecting to bring accountability in the tax administration and helping honest taxpayers with accurate data.
Old Vs The New System: What’s Changed?
The previous 26AS form was called annual credit statement or annual tax statement. It contained information such as tax deducted at the source (TDS) and tax collected at the source (TCS) against a PAN. Apart from that, some additional information was also reported, like self-assessment taxes paid by you in advance and refunds. But the new form will contain additional information.
The name of the new form will change too. The new form will be called an annual information statement or AIS. It will contain SFTs to help taxpayers keep a tab of all their major financial transactions.
The new income tax form 26as will fulfil the following objectives
- Bring more clarity to the existing system by increasing accountability of the tax administration
- Help taxpayers compare if all their transactions are in line with their income reported
- Act as a ready reckoner for the taxpayers while filing for returns
- Eliminate chances of error in reporting and misreporting
- It will assist in the new form of digital tax paying by reminding taxpayers of all the high-value transactions conducted by them
What Information Will The New Form Contain?
It will contain information on transactions reported by ‘specified persons’ on SFT during a financial year. In laymen’s term, it will contain information on high-value transactions like,
- Cash deposit/ withdrawal from savings accounts
- Sale or purchase of immovable property such as buildings, lands, benefits arising from lands, hereditary allowance and more
- Time deposits
- Credit card payments
- Purchase of investment vehicles such as equities, debentures, foreign currencies, mutual funds, and more
- Buyback of shares
- Cash payment on goods and services
How Will It Impact Taxpayers?
Under the IT Act, you can claim a refund on the tax amount reflected in Form 26AS. Now there can be a situation where the tax amount is wrongly reported or the source responsible for reporting it failed to report the deduction or reported wrongly. In any of the situations, your income tax credibility will get impacted. New Form 26AS will report all taxes paid by you. Moreover, the new form will make the high-value transaction space transparent. From now on, taxpayers will have to be more careful while carrying out high-value transactions. They will require to maintain all details, records, reasons, and evidence of the transaction to disclose it in ITR filing.
The government is currently trying to popularise digital filing of income tax. During the budget session of 2020, the Finance Minister has indicated that government is willing to provide taxpayers with additional information that is now available with the tax department due to advancement in technology to assist in seamless tax filing.
The new form will contain additional information on details of specific transactions and information concerning proceedings, demands and more. With the additional information available, it will be easier for the taxpayers to get an overview of his financial status and improve compliance.