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Over the last few years, the Government of India has expanded the scope of information being collated by revenue authorities from different sources vis-à-vis the income earned by the taxpayers, to widen the tax base and boost tax collections.
The Finance Minister while presenting the Union Budget for 2019 had apprised the taxpayers about the measures being taken to simplify the tax return filing process. This included providing pre-filled income-tax returns to taxpayers containing details of salary, capital gains on securities, interest earned on bank accounts, dividends, etc. The Information regarding these sources of income was proposed to be collated from the sources such as banks, stock exchanges, mutual funds etc.
Also, other charitable approved institutions which receive donations or contributions from the general public were required to furnish a statement of donations/ contributions received by them to the income-tax authorities and the same was proposed to be reflected in an Annual Information Statement (AIS) to be made available to taxpayers.
Subsequently, the Finance Act 2020 introduced a new provision to enable compiling and issue of an AIS to provide a comprehensive summary of various financial transactions undertaken by taxpayers, including details of taxes withheld or paid during a financial year, specified financial transactions, status of tax demand/ refund and tax proceedings, etc.
The AIS was proposed as a replacement for the Form 26AS which taxpayers have been primarily referring to for reconciling the details of taxes deducted or paid during a financial year.
The AIS rolled out on November 1, 2021 and taxpayers can now access the same by logging into the income tax e-filing portal. The AIS is aimed at achieving multiple objectives – to provide a comprehensive view of the income and taxes, promote voluntary compliance, enable seamless filing of tax returns and deter or reduce instances of non-compliance.
It is important to note that the Form 26AS would continue to be available on the TRACES portal in parallel till the new AIS is validated and gets fully operational with updated information.
The AIS relies on modern technology tools to collate PAN based financial data from various sources to help the taxpayers estimate their income and taxes and support in their tax filing obligations. Some of the key features of the AIS mechanism are:
Facility of feedback: Taxpayers will be able to submit online feedback on the information displayed in the AIS and download information in various formats such as PDF, JSON, CSV file formats. The AIS utility will also enable taxpayers to review AIS and upload feedback in an offline manner. Further, additional facility of an AIS mobile application has been provided which will enable taxpayers to view AIS and upload feedback through mobile devices.
Taxpayer Information Summary (TIS): A simplified TIS has also been generated for each taxpayer which shows a summary of total income under different heads, the aggregate value of sale or purchase of securities and mutual funds, aggregate foreign remittances made during the year, etc.
The AIS is divided into two parts, Part A which captures the taxpayer’s basic information and Part B which captures the information related to taxes and financial transactions.
Part A displays general information pertaining to the taxpayer including PAN, last four digits of your Aadhaar Number, taxpayer’s name and address, date of birth/incorporation/formation, mobile number and email address. These details are captured as per the details in the income tax department’s PAN database. Therefore, in case there is any change in details such as mobile number, email id, address, etc., the same should be updated in the e-filing portal so that personal details are reflected correctly.
Part B displays the following information with respect to taxes and financial transactions:
TDS/TCS information: Information related to tax deducted or collected at source on different sources of income earned/ received during the financial year is reflected in this section. This also shows the type of income and the information source, i.e. name of the entity which made the payment along with its tax deduction account number (TAN).
Taxes paid by taxpayer directly: Information related to advance tax and self-assessment tax paid by the taxpayer are provided in this section along with the date of deposit, the tax challan number, etc.
Details of Specified Financial Transaction (SFT): various entities such as banks, mutual funds, registrar and transfer agents, etc., submit information to the tax authorities regarding transactions undertaken by taxpayers during the financial year. These transactions are linked to the taxpayer’s PAN and collated by the tax authorities in the AIS. This includes sale/ purchase of equities, mutual funds, foreign remittance made by any person through an authorised dealer, off market transactions reported by depository/ registrar and transfer agent, dividends, etc.
Details of demand, refund and tax proceedings: The AIS would also provide a summary of demand raised for any financial year, refund due, status of any tax proceedings initiated, or which have been completed.
Other information: Any other information in relation to the above details that is required to be reported would also be displayed in the AIS. For example, in case of income from salary, in addition to gross salary and taxes withheld as currently shown in the Form 26AS, the AIS also shows the breakup of the salary under allowances, perquisites and profits in lieu of salary as reflected in the Form 16 issued by the employer.
AIS can be accessed by logging into the income tax portal (https://eportal.incometax.gov.in/iec) using the log in credentials. The AIS option can be found under the ‘Service’ tab on the main page and the taxpayer will be redirected to a new AIS portal. The new AIS portal allows the taxpayer to select the Financial Year and shows two separate files for AIS and Tax Information Summary (TIS). The AIS can be downloaded as a PDF or JSON file.
The AIS file is password protected and the taxpayer would need to use a combination of PAN (in upper case) and the date of birth in case of individual taxpayer or date of incorporation/ formation for non-individual taxpayer in the ddmmyyyy format.
The AIS page also provides various resources to taxpayers to assist them in using the Portal. For example, the Training/ User Manual provides step by step assistance to users in using the AIS functionality and the frequently asked questions (FAQs) provide guidance on common doubts likely to be raised by the taxpayers.
As this is a new feature, the Central Board of Direct Taxes (CBDT) has vided its press release providing guidance to taxpayers on using this feature.
Review of AIS for incomplete information: It is important to keep in mind that the new AIS includes information presently available with the Income-tax authorities. However, there may be other transactions relating to the taxpayer that are not presently displayed in AIS since these may not have been reported to the income-tax authorities. Hence, a taxpayer should also check all related information and ensure report complete and accurate information in the ITR.
Feedback for discrepancy in information: The tax department recognises that there may be instances where the information has not been reported accurately to the tax authorities by various entities. A request to review the information shown in AIS is requested from the taxpayers to provide feedback if the information needs modification. Users have an option to submit feedback on a single information, in bulk mode or modify the feedback. Some of these features are not yet operational and are proposed to be released soon.
Currently, there is no limit on the number of times one can modify previously given feedbacks, but the taxpayers need to provide the reason and remarks for the same as these may be taken up for review and approval before giving effect to a modification request.
Discrepancy of information in 26AS vs. AIS: CBDT has clarified that AIS data cannot be used suo moto for calculating tax liability and filing tax return. Taxpayers should refer to AIS along with the Form 26AS and other documents for filing tax returns. With respect to any variance between the TDS/TCS information as displayed in existing Form 26AS available on the TRACES portal and similar information in AIS Portal, taxpayers have been advised to rely on the information displayed in the Form 26AS for the purpose of filing of ITR.
The Income Tax authorities collate information from third parties with respect to the financial transactions undertaken by a taxpayer during the financial year which can be verified in Form 26AS. Till date the scope of 26AS was limited to the details with respect to TDS, TCS, advance tax, self-assessment tax, etc.
However, AIS will also contain details of transactions undertaken by the taxpayer through the stock exchange, example the sale/purchase of securities or mutual funds, dividend income, interest income, purchase/sale of immovable property, as well as off market transactions which are reported by registrar and transfer agents. Therefore, AIS provides a broader and comprehensive view vis-à-vis the Form 26AS.
Considering above, it is pertinent to note that taxpayers should review their AIS, verify the information about the income earned during FY 2020-21, calculate the tax liability and file the tax return with accurate details.
The original tax filing due date of July 31, 2021 applicable to individual taxpayers (without any audit obligation) for FY 2020-21 has been extended to December 31, 2021. In case of individual taxpayers who are subject to tax audit, the extended due date is February 15, 2022. Therefore, individuals who have not yet filed their returns may use the extended timeline to file the tax return based on review of information as per AIS read with the information reflected in Form 26AS.
As the AIS was introduced from November 1, 2021, it is possible that many taxpayers have already filed their tax returns. In such a case, it is recommended that taxpayers review the information appearing in the AIS and if any income, whether taxable or exempt, has been missed in the tax return, the same may be included now by filing a revised tax return. Individual taxpayers have time till March 31, 2022 for filing a revised tax return.
Over a period of time, AIS is likely to bring in more transparency, help capture large parts of the income and taxes and increase overall compliance, besides, helping the taxpayers in preparing and filing their tax return.
This article was originally published in Forbes.