Annual Information Statement

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• August 11, 2020

With an aim to curb tax evasion and promotion of transparency, the Honorable Finance Minister of India, Nirmala Sitharaman, in budget 2020, proposed to introduce a new Annual Information Statement replacing the existing Form 26AS.

CBDT has notified vide Notification No. 30/2020 dated 28.05.2020, that the age-old Form 26AS, notified under Rule 31AB, by inserting a new Rule 114-I in the Income Tax Rules, 1962, be replaced with an Annual Information Statement under section 285BB of Income Tax Act, 1961 (the “Act”). The New Annual Information Statement will be effective from 01.06.2020 and from that date the old Form 26AS will become obsolete.

The budget for the year 2020-21 implemented the introduction of Section 285BB into the Act. As per the agreed proposal, the idea is to involve a detailed financial statement which shall comprise all-important financial transactions conducted by an individual taxpayer in a particular year; the information may be included into the Annual Information Statement:

• Property held by a taxpayer;
• Shares possessed by a taxpayer;
• Mutual fund transactions conducted by a taxpayer;
• TDS and TCS information.

Form 26AS under Section 203AA of the Income Tax Act, 1961
The Form 26AS is an annual consolidated credit statement issued by, under Section 203AA of Income-tax Act, 1961.

The section 203AA of the Act requires the income-tax authority or the person authorized by the authority referred to in section 200(3) prepare and deliver a statement as prescribed in Form 26AS to each and every person in respect of whose income, the tax has been deducted or on whose income the tax has been paid specifying the amount of tax so deducted or paid, and within such time, as may be prescribed.

Form 26AS provides details such as TDS, TCS, and other prepaid taxes that are submitted with the government against one’s PAN also which is available for verification, at all times, on the website of the income tax department.

As the disclosures in Form 26AS would be needed to be extended beyond the information only about tax deducted, it is proposed to inaugurate a new section 285BB in the Act for Annual Information Statement.

Eventually, section 203AA is proposed to be revoked.

For the execution of the Annual Information Statement, an amendment is brought in the Act, through Clause 101 of the Finance Bill, 2020, that provides the facility of providing the information to a taxpayer by the Income Tax Authority.

Annual Information Statement under section 285BB of Income Tax Act, 1961
Annual Information Statement is more comprehensive than the Form 26AS as it will include more information of a taxpayer beyond the TDS and TCS transactions like inclusion of Mobile number, email ID, and aadhar number etc. Currently, only the transactions which relate to TDS or TCS are reported by the tax deductor and the same is reflected in Form 26AS. It is important to note that those transactions on which tax is not deducted are not reported and reflected in Form 26AS, not including those circumstances where Form 15G/Form 15H or lower TDS certificate under section 197 of the Act are furnished.

Nevertheless, the format of the Annual Information Statement is not yet notified, and it has to be seen how the new form is designed, structured, and presented to include all the transactions of taxpayers. But certainly, it will broaden a taxpayer’s base as concealing any income will not be easy. A taxpayer can reach the Annual Information Statement through his income tax e-filing account. However, there is no provision related to confirming the transactions by the reporting entity with the taxpayer before the same is made available to the income-tax department. Thus, if any reporting entity reports any wrong/incorrect or misleading information, it will create troubles for the taxpayer.

For clarification, it must be kept in mind that a list of “specified persons” who are required to record and report the high-value financial transactions of taxpayers through an annual information report (AIR) is prescribed under Section 285BA of the Act. These specified persons may include:

•  Any person liable for audit under section 44AB of the Income-tax Act, 1961;
•  Any Banking Company;
• Any Co-operative Bank;
• Any Post-Master General of Post office;
• Any Nidhi Company referred to in sec 406 of the Companies Act 2013;
• Any Non-banking Financial Company;
• Any Institution issuing a Credit Card;
• Any Company or Institution issuing bonds/debentures;
• Any Company issuing shares;
• Any listed company purchasing its own securities;
• Any Trustee of a Mutual Fund or any such other person authorized by the trustee;
• Any Authorized Dealer, Money Changer, Off-shore Banking Unit or any other person defined in FEMA, 1999; and
• Any Inspector-General or Sub-Registrar appointed under Registration Act, 1908.

The list of high-value transactions, for which an AIR has to be filed, is prescribed in Rule 114E of the Income-tax Rules, 1962. An AIR filed by the specified person helps the government gather information and cross-verify the income declared and tax paid by the income tax assessee in his income tax return.

Features of Annual Information Statement
This amendment will come into force w.e.f. 1st June 2020. And, it is anticipated that the new system will come in place before that date.

• Information with respect to specified financial transactions: There will be a big possibility for Companies issuing bonds and debentures, banks and mutual funds that they would be required to share all the details on transactions being entered into by its customers during the year related to a particular PAN or Aadhar No. Furthermore, a charitable or scientific research institution that receives donations or contributions, under section 80G and section 35 of the Act, is also required to furnish the statement of donations/contributions received by it, to the income-tax authority and the same shall be reflected in the Annual Information Statement.

• Information of Proceedings: The new form will include details of pending proceedings with the tax department along with details of completed proceedings. This will help the assessees to stay updated about the status of the proceeding.

• Information furnished by other authorities: New AIS will also disclose any information received from any other officer or an authority under any law such as custom, GST, Benami Law, CBI, SEBI etc. and it includes any information disclosed received from any other country against the taxpayer during the financial year with respect to forgery, illegal transactions etc.

• Information related to demand and refund: It require the details of tax refund paid or any amount demanded by Income tax department and includes interest.

• Information related to TDS/TCS:    
  •  It contains Details of Tax Deducted at Source by other parties and deposited to government. It can be from multiple sources such as your salary, pension, interest income etc.
  • The details include name of deductor, TAN of Deductor, transaction date, section under which TDS has been deducted, Amount paid, Tax deducted, Tax deposited, etc.
  • It contains the details of Tax Collected at source by the seller from you. It includes transactions such as purchase of scrap, tendu leaves, Minerals like lignite, coal and iron ore, purchase of motor vehicle above Rs. 10 lakh, Alcoholic liquor made for human consumption, etc.

• Information related to payment of taxes: It shows details of Tax paid other than TDS or TCS. It includes taxes paid by the individual such as Advance tax, any self-assessment tax. It also contains the Income Tax challan details.

• Any other Information in relation to rule 114-I (2):     
  • The rule authorize Principal director general of Income tax or the director general of Income tax or any person authorized by him to upload the information received from any officer, authority or any body performing any function.
  • It also includes information received under an agreement referred in section 90 or 90A of Income tax act (Double taxation relief/ Foreign tax
  • It further includes any information which is in the nature of income to the department.

At AJSH, we assist our clients in filing their annual tax returns and computing their tax liability for the year, filing of TDS returns, Assessment of various persons. If you have any questions or would like to know about the new tax regime, kindly contact us.