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Importance of Form 26AS in ITR filing process

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By Sachin Vasudeva

Form 26AS is an annual statement which has details of the tax credited against the PAN of a tax payer. This form can be accessed from the Income Tax Department’s e-filing portal by a tax payer using his/her Permanent Account Number (PAN). You can refer to your Form 26AS for details of your income (on which taxes have been deducted) as well as the taxes that have been paid by or on your behalf by the deductor (could be your employer, bank etc.) to the government treasury.

The Form 26AS, i.e., one’s tax passbook, will come with a few rather significant changes this year. Along with a new format, effective from June 1, 2020, your Form 26AS will now contain information regarding tax refunds and demands (if any) against your name. These changes were notified by the government via a notification dated May 28, 2020.

The government introduced section 285BB in the Income-tax Act, 1961 via Finance Act 2020 and inserted a new Rule, 114- I via a notification dated May 28, 2020 for making changes in Form 26AS.

In its new avatar, the Form 26AS will become a potent tool in the hands of the tax authorities, which is why it is important for a tax payer to know about these changes.

  • What is new in the Form 26AS

From an Annual Tax Statement, the new Form has now become an Annual Information Statement. The old Form contained information only about details of tax deducted at source (TDS) against your PAN, tax collected at source (TCS) on your PAN and details of other taxes paid. The new Form 26AS has two parts: Part A and Part B.

Part A of the Form contains general information about the tax payer against the following fields:

1. Permanent Account Number

2. Aadhaar Number

3. Name

4. Date of Birth/Incorporation

5. Mobile number

6. Email address

7. Address

It is important to note that the new Form contains a field for mobile number and email address of the tax payer which hitherto was not captured. This indicates the importance of the mobile number and email address in the scheme of things where all correspondence with the tax authorities will be done only through a faceless mechanism.

Part B of the Form contains the following information:

1. Information relating to tax deducted or collected at source

2. Information relating to specified financial transactions (SFT)

3. Information relating to payment of taxes

4. Information relating to demand and refund

5. Information relating to pending proceedings

6. Information relating to completed proceedings

7. Any other information in relation to sub-rule (2) of rule 114-I

Information against point numbers 1, 3 and 4 continue to be the same as in the earlier form and therefore the focus of this article is on the information sought to be disclosed in the Form against other items that have been inserted.

  • Verification of details in 26AS vis-à-vis TDS certificates

While 26AS is your tax passbook but just like a bank passbook, it could have unintended errors. Therefore, while preparing your ITR you must tally the income details and tax deducted shown in the Form 26AS with the details as per your records. If there is a mismatch in either the quantum of income or the TDS then this should be brought to the notice of the deductor who would have to revise the TDS return basis which the entry in your 26AS will get rectified.

This exercise is required to avoid any enquiry from the tax department in case of a mismatch between your return and the Form 26AS. The reasons for mismatch could be amount of tax deducted from salary is not correctly reported by the employer, TDS deduction is reported in wrong section, incorrect PAN being punched in the TDS return by the deductor or even as a result of an incorrect PAN inadvertently being given by you to the deductor.

  • Information relating to specified financial transactions

Rule 114E of the Rules read with Section 285BA of the Income-tax Act casts an obligation on different categories of persons to report certain financial transactions carried on by a class of persons. Basis this report furnished by different categories of persons mentioned in the Rule, a statement of financial transactions carried out by a person during a particular year will be collated and be a part of the Form 26AS of the tax payer.

Transactions that would now form a part of Form 26AS are mentioned below:

1. Payment made in cash for purchase of bank drafts or pay orders or banker’s cheque of an amount aggregating to Rs 10 lakh or more in a financial year, payments made in cash aggregating to Rs 10 lakh or more during the financial year for purchase of pre-paid instruments issued by the Reserve Bank of India under section 18 of the Payment and Settlement Systems Act, 2007 (51 of 2007), and cash deposits or cash withdrawals (including through bearer’s cheque) aggregating to Rs 50 lakh or more in a financial year, in or from one or more current account of a person.

2. 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) of a person.

3. One or more time deposits (other than a time deposit made through renewal of another time deposit) of a person aggregating to Rs 10 lakh or more in a financial year.

4. Payments made by any person of an amount aggregating to Rs 1 lakh or more in cash; or Rs 10 lakh or more by any other mode, against bills raised in respect of one or more credit cards issued to that person, in a financial year.

5. Receipt from any person of an amount aggregating to Rs 10 lakh or more in a financial year for acquiring bonds or debentures issued by the company or institution (other than the amount received on account of renewal of the bond or debenture issued by that company).

6. Receipt from any person of an amount aggregating to Rs 10 lakh or more in a financial year for acquiring shares (including share application money) issued by the company.

7. Buy back of shares from any person (other than the shares bought in the open market) for an amount or value aggregating to Rs 10 lakh or more in a financial year.

8. Receipt from any person of an amount aggregating to Rs 10 lakh or more in a financial year for acquiring units of one or more schemes of a mutual fund (other than the amount received on account of transfer from one scheme to another scheme of that mutual fund).

9. Receipt from any person for sale of foreign currency including any credit of such currency to foreign exchange card or expense in such currency through a debit or credit card or through issue of travellers cheque or draft or any other instrument of an amount aggregating to Rs 10 lakh or more during a financial year.

10. Purchase or sale by any person of immovable property for an amount of Rs 30 lakh or more or valued by the stamp valuation authority referred to in section 50C of the Income-tax Act at Rs 30 lakh or more.

11. Receipt of cash payment exceeding Rs 2 lakh for sale, by any person, of goods or services of any nature (other than those specified at Sl. Nos. 1 to 10 of this rule, if any.)

This data is compiled based on the information received by the authorities from various sources such as ‘Annual Information Report’, Online Tax Accounting System (OLTAS) and the Central Information Branch of the Government of India.

How the reporting of this information will help the tax payer

A tax payer can verify his actual transactions with the transactions reported in his Form 26AS before filing his ITR. This will minimise the errors on account of omission of certain transactions while filing ITR.as this will serve as a ready reckoner. At the same time, it will not be possible to conceal the effect of any such transaction that it may have on the ITR.

It is important to note that while these transactions are perfectly legitimate, the authorities will now be able to verify the amount spent vis-à-vis your income. Let us say a person declares his income as below Rs 5 lakh but his credit card spends are more than Rs 10 lakh. From now, such situations will be apparent from the tax payer’s Form 26AS.

Information related to pending and completed proceedings

A new feature of the Form 26AS is that information related to all pending and completed proceedings for that particular assessment year will be available at a glance. This information will help the tax payer to match his records with the data being uploaded by the tax authorities.

Other information

India has signed agreements with many countries to share/exchange information about tax-payers income/asset details in other countries. Any such information received by the Indian Government from the Government of a foreign State would be reflected in the Form 26AS. Besides this, the Government has now mandated charitable and scientific research institutions which receive donations or contributions to furnish a statement of such donations or contributions received to the income-tax authority. The same will also be reflected in Form 26AS.

How to access Form 26AS

As mentioned above, this form is available in the tax payer’s account on the Income Tax Department’s e-filing portal: https://incometaxindiaefiling.gov.in

Once you log in, click on the ‘View Form 26AS’ tab, either under ‘My Account’ or ‘Quick links’ tabs. You need to then choose the relevant assessment year (i.e., year following the financial year) for which you want to download the statement.

Conclusion

While the CBDT’s press release states that “The new Form 26AS is the faceless hand-holding of the taxpayers to e-file their income tax returns quickly and correctly”, with the information now available at a glance, the chances of it being misused cannot be ruled out. With these changes, Form 26AS is going to be even more important as this could be used by banks and other institutions who lend money to tax payers to do their due diligence.

(The author is a practising chartered accountant.)

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