November 30 – the extended due date for filing income tax returns for the assessment year 2020-21 (financial year 2019-20) – is just a few weeks away.
Irrespective of whether or not it is pushed ahead once again by the central government and the income tax (I-T) department, it is best to complete the process at the earliest.
But before you start the return filing process, go through Form 26AS to verify the tax deducted from your income. This year, a new format with details on high-value financial transactions came into effect from June 1, 2020.
What information does Form 26AS contain?
Your form 26AS reflects details of taxes deducted on your behalf. For example, tax payable on your salary is deducted by your employer and deposited with the I-T department every month before paying your net salary. Likewise, your bank typically deducts tax on your fixed deposit interest before crediting it your account on maturity.
In addition, the tax collected at source, advance tax or self-assessment tax that you deposit will also be displayed in this statement, apart from any refund from I-T on excess tax paid.
How can I access it and use the information in the form?
You can view and download Form 26AS by logging on to www.incometaxindiaefiling.gov.in. You will need to first register if you haven’t already, with your PAN acting as your user ID. You will then find it under the ‘My account’ tab (see graphic).
Before you embark on your return filing exercise, ensure that the TDS details in your Form 16, for instance, tally with information in 26AS on tax deposited by your employer. “Ordinarily, there will not be any difference. Still, if there is, the person will need to approach the employer who has issued Form 16 to correct it or the TDS return filed by the employer,” says Sandeep Sehgal, Director, Tax and Regulatory, AKM Global. You can also raise a query by using the ‘Tax credit mismatch’ function under ‘My account.’
What are the key changes in the form this assessment year?
For one, it will contain additional personal information such as your Aadhaar, date of birth, mobile number and email ID. “The reporting in Form 26AS, which has been renamed as Annual Information Statement, has been broadened. The ecosystem of online correspondences and tracking between the tax authorities and the taxpayers would become more robust with the inclusion of these details,” says Suresh Surana, Founder, RSM India, a tax consultancy firm.
More importantly, it will also spell out a host of other details related to your high-value financial transactions and tax proceedings – ongoing as well as completed. For example, if you have paid over Rs 1 lakh by cash to clear your credit card bill, it will show up under ‘details of SFT (statement of financial transactions)’ in Part E of Form 26AS. In case you have used electronic or cheque modes to pay the bill, the threshold will be Rs 10 lakh.
Cash deposits of over Rs 10 lakh in savings accounts, for instance, will reflect in the statement as will fixed deposits of over Rs 10 lakh opened during the financial year (source: cleartax.in).
Stocks and mutual fund transactions of over Rs 10 lakh will also find a place in this section, along with purchase or sale of immovable property valued at over Rs 30 lakh. Do note that the I-T department has had access to this information since 2016; now, it will be displayed in your form 26AS. “Availability of such ready details would enable the taxpayer to easily reconcile and report the information pertaining to the financial transactions correctly,” says Surana.
The scope of SFT could be broadened further in future, if the income tax department’s proposal to cast the net wider goes through.
Also read: How the new form 26AS can make your income tax-filing and compliance burden heavier
How will the new-look form 26AS help tax-payers?
Compliance will be more efficient and filing returns made easier, say experts. “Many miss reporting income accrued on some investments as the same is not received by them. This can be avoided if the reporting of significant transactions is available easily,” says Aarti Raote, Partner, Deloitte India. In some cases, the deductors do not deduct any taxes, but you do not have the leeway of not disclosing the same. “There may be investments which are exempt and hence no taxes are withheld. These need to be reported as exempt income. If these are beyond the specified limits, then tax-payers will have this information handy to be reported,” she adds.
So, the newer details will reduce boost accuracy of your return. “For those who have to file complex returns, this is a welcome change. It will facilitate correct calculation of their liability with little or no effort in collating information due to easy accessibility of added details,” says Sehgal. It will also help them verify the details with their records and take steps to get incorrect information, if any, rectified instead of landing up with tax notices later.
What are its limitations?
Despite the additional details, you cannot rely on Form 26AS alone to make your returns fool-proof. “Only information exceeding the thresholds would be reported. (But) there are other incomes such as savings bank interest and dividends on which taxes may not be deducted and it would not form part of Form 26AS. Tax-payers need to be alert in reporting this income,” points out Raote. In other words, if certain incomes do not form part of SFT as they have not breached the specified threshold, the onus is on you to ensure that they get reported in your returns.
Also, tighter scrutiny means that you will need to ensure that your records and documents are in order to draft a response if you do get a tax notice.
This apart, if thresholds are lowered in future in line with I-T department’s proposal cited earlier, compliance burden will rise as you might need to preserve bills even for lower-value transactions.Also read: Received an income tax notice? Here is what you can do