Promoting compliance and ensuring accurate reporting have long been the key challenges in implementing tax laws. However, leveraging technology, the Income Tax Department has taken a significant stride towards addressing these issues through the introduction of the Annual Information Statement (AIS), a powerful tax transparency tool.
The AIS serves as an extension of Form 26AS, which traditionally provided details of property purchases, high-value investments, and TDS/TCS transactions for a given financial year. Expanding on this functionality, the AIS now encompasses additional information such as savings account interest, dividends, rent received, purchase and sale transactions of securities or immovable properties, foreign remittances, interest on deposits, GST turnover, and more. Most importantly, it empowers taxpayers by giving them the option to dispute any transaction that may have been reported in the AIS erroneously.
The information presented in the AIS is categorised into two parts. Part A offers general information regarding the taxpayer, including their PAN, masked Aadhaar number, name, date of birth/incorporation/formation, mobile number, email address, and taxpayer’s address. Part B, on the other hand, provides detailed information about income, TDS and specified transactions.
Transaction-level details
One of the key benefits of the AIS is its ability to provide transaction-level details for the amounts that are pre-filled in the taxpayer’s income tax return (ITR). For instance, the taxpayer can now reconcile the total dividend income amount pre-filled in their income tax return with the help of the individual transaction-level details of dividends received during the financial year. This simplifies the return filing process.
Additionally, the AIS offers taxpayers the opportunity to report any discrepancies and avoid triggering income tax notices. By providing a transparent ecosystem, the Income Tax Department enables taxpayers to verify the information available with the department and facilitates smoother reconciliation and easier filing of income tax returns. This tool sets the groundwork for a more robust pre-filling system for future income tax returns.
Tax transparency
The AIS represents a significant step towards improving tax transparency and streamlining the compliance process. Despite the potential benefits, the realisation of fully pre-filled ITR is a complex endeavour. It requires a robust and integrated framework that consolidates data from various sources, including banks, financial institutions, employers, and others. Moreover, ensuring the accuracy and security of such data poses significant challenges that must be addressed before implementation.
As we envision the future, there is a promising prospect of seamless and hassle-free ITR filing. Such a system would greatly benefit both taxpayers and the Income Tax Department in achieving their goals. However, it is important to acknowledge the efforts being made to progress towards this goal. The introduction of AIS is a significant step in this direction. By providing taxpayers with detailed transaction information and facilitating reconciliation, the AIS lays the groundwork for a more tax transparent ecosystem.
The writer is partner, Nangia Andersen India. Inputs from Neetu Brahma