Beware: IT Department through New Form 26AS has almost all information about your transactions
There was a time when the IT department only knew what the taxpayer disclosed in his return of income & whatever was gathered from the scanty books of account produced during the course of assessment. The accounts were maintained manually in local languages which made it impossible to decipher and co-relate. There were hardly any checks & controls available with the department to check the veracity of the details contained in the ITRs filed by the taxpayers. However, with the usage & application of Information Technology, the entire system has undergone a radical change and as of now all recorded information can be assimilated and utilised for assessing the true income of the taxpayer. The Statement of Financial Transactions (SFTs) received by the various departments & functionalities have been instrumental in unearthing the undisclosed transactions leading to assessment of tons of unaccounted incomes. The GST department has synchronised with the Income Tax Department to minimise discrepancies. With Aadhaar Cards being linked to all banks/Financial Institutions, direct & indirect tax sites, department of sale of immovable properties & transactions in shares & securities, foreign travel, forex transactions, expenses incurred in Hotels & Restaurants etc. are being reported & recorded for due action by the IT Department. To make evasion impossible, the Ministry of Finance has introduced a new Form 26AS with a way to induce honesty & ease amongst the taxpayers, which is indeed a welcome step.
The Central Board of Direct Taxes (CBDT) has issued a Press Release on 18th July, 2020 regarding the New Form 26AS. The new Form 26AS is the faceless hand-holding of the taxpayers to enable them to e-file their income tax returns quickly and correctly. From the current Assessment Year i.e. Assessment Year 2020-21, the new and improved version of Form 26AS would be available for the aid of the taxpayer. The new Form would carry some additional details/information on the taxpayers’ financial transactions as contained in the Statement of Financial Transactions (SFTs) in various categories. The information which is being received by the Income Tax Department from the various filers of the specified SFTs is shown in Part E of said Form 26AS. This will facilitate voluntary compliance from the taxpayers, their tax accountability and ease of e-filing of returns in as much as the same can be used by the taxpayer to file its correct ITR after duly incorporating the said information. It will also enable correct computation of Income and in determining the correct tax liability by the taxpayer in a feel-good environment. This would also bring in further transparency and accountability both for the taxpayer as well as the tax administration.
The earlier Form 26AS was also very effective but it gave limited information with regard to financial transactions. It gave due information & details of the Advance Tax paid, the tax deducted at source under different heads and tax collected at source, refunds and TDS defaults. But the new Form 26AS is more exhaustive and will help the taxpayers to verify & doubly ensure their financial transactions so that they are duly reflected in their Income Tax Returns. On viewing the new Form 26AS, the taxpayers can recall & record all their major financial transactions so that their ITR contains the details as enumerated in the said form & thereby reflect the correct income of the taxpayer. The Income Tax Department earlier also used to receive information like cash deposit/withdrawal from saving bank accounts, sale/purchase of immovable property, fixed deposits, credit card payments, purchase of shares, debentures, foreign currency, mutual funds, buy back of shares, cash payment for goods and services, etc. under Section 285BA of Income-tax Act, 1961 from “specified persons” like banks, mutual funds, institutions issuing bonds and sub-registrars etc., with regard to individuals having high-value financial transactions since the Financial Year 2016 onwards. However, these information received as per the SFTs will now be shown in the new Form 26AS w.e.f. Financial Year 2019-20 and would be duly displayed in part E of the Form giving details like type of transaction, name of SFT filer, date of transaction, single/joint party transaction, number of parties, amount, mode of payment and remarks etc. This will help the honest taxpayers by updating financial transactions at the time of filing their IT returns while it would sound a warning bell to the dishonest taxpayers that these transactions are within the knowledge of the Department and therefore do not take the risk of concealing them in your ITRs.
The purpose of enlarging the scope of Form 26AS is to prevent suppression of information by taxpayers. This will desist the taxpayers who deliberately/inadvertently conceal financial transactions in their returns of income. The cases of such taxpayers used to be selected for scrutiny to explain the ‘mismatch’ in the information leading to lengthy proceedings in different forums. With the introduction of the new modified & enlarged version of Form 26AS, the taxpayer would be cautioned in advance and the taxpayer would be constrained to include those details while computing his ‘True’ Income, thereby saving himself from imposition of penalty for concealment & prosecution. This step of the Government is a conscious effort, in a single stroke, to bring ease to honest taxpayer & also curb & contain tax evasion.