The Annual Information Statement or (AIS), will be replacing Form 26AS as proposed in the Union Budget 2020. The AIS will provide particulars of a taxpayer’s financial transactions in an all-inclusive manner. Form 26AS is an annual consolidated credit statement issued by the Income Tax department under Section 203AA of the Income Tax Act, 1961, to help taxpayers cross-verify their earned income, tax deducted at source (TDS) and tax deposited in one place.
The Union Budget 2020 has offered tax benefits to a certain section of taxpayers for whom switching to the new tax regime is the sensible choice. The budget announced steps to put a lid on tax evasion and promote transparency in order to provide citizens with a simpler tax system of which includes introducing AIS.
The format of AIS is yet to be decided but according to expert opinion, the statement will provide the data included in Form 26AS along with details of capital gains and losses, shares and mutual fund transactions by taxpayers.
Another amendment for replacing Section 203AA with Section 285BB will become effective from June 1. This new insertion in the Act will be for the purpose of facilitating the function of AIS. As per Section 285BA, ‘specified people’ are required to report or file all high value financial transactions of individuals through an Annual Information Report (AIR). The list of all the high value transactions is notified in Rule 114E of the Income Tax Rules, 1962.
Budget 2020 has heralded the concept of pre-filled forms which will contain data sourced from different places, such as Form 26AS, TDS returns filed by the employer, the previous year’s ITR and much more. The AIR filed by specified persons will be further helpful to the government in collecting information and cross-checking it against declared income and taxes paid in ITR.
Introduction of AIS should be helpful in increasing data exchange between taxpayers and tax authorities. The Finance Ministry is also trying to widen the tax net and make it difficult for taxpayers to conceal any financial data from tax authorities.