Importance of Annual Information Statement while filing Income Tax Return!!

Introduction: The Central Board of Direct Taxes (CBDT) has introduced a new functionality in the Annual Information Statement (AIS) for taxpayers, enhancing transparency and accuracy in tax reporting. This new feature allows taxpayers to view the status of their feedback in real-time, ensuring that their financial transactions are correctly reported. In this article, fictional characters Arjuna and Krishna discuss the implications and impact of AIS on filing Income Tax Returns, highlighting the benefits of the new functionality.

Arjuna (Fictional Character): Krishna, I heard that the Central Board of Direct Taxes (CBDT) has introduced a new functionality in the Annual Information Statement (AIS) for taxpayers. Could you explain what this new feature is about?

Krishna (Fictional Character): Arjuna, you are right. The CBDT has recently rolled out a new functionality in the AIS that allows taxpayers to view the status of their feedback in real-time. The AIS is a comprehensive statement that provides detailed information about various financial transactions undertaken by taxpayers during a financial year. It is available to all registered taxpayers through the compliance portal on the e-filing website (www.incometax.gov.in).

Arjuna (Fictional Character): Krishna, what could be the possible scenarios its implications and Impact of Annual Information Statement on Income Tax Return?

Krishna (Fictional Character): Arjuna, following are the possible scenarios:

Scenario A: Return Matches with Information in AIS

When the information in the taxpayer’s return matches with the details provided in the AIS, it signifies a high level of accuracy and consistency. This indicates that the taxpayer has reported their income and transactions correctly, reducing the likelihood of discrepancies or inquiries from the tax authorities.

Scenario B: Return Does Not Match with AIS

If the information in the taxpayer’s return does not match with the details provided in the AIS, it raises concerns about the accuracy of the tax reporting. Such discrepancies may arise due to unintentional errors, omissions, or deliberate attempts to underreport income or inflate deductions.

A mismatch between the return and AIS information may lead to scrutiny from the tax authorities. Taxpayers may be required to provide additional documentation or explanations to reconcile the discrepancies, leading to delays in processing returns and potential penalties for inaccuracies.

Scenario C: Information is Incorrect in AIS and Feedback is Provided

When taxpayers identify incorrect information in the AIS and provide feedback, it initiates a process for rectification. Incorrect details in the AIS can arise from various sources, including reporting errors by third parties, data entry mistakes, or outdated information.

Providing feedback on incorrect AIS information enables the tax authorities to rectify errors promptly, reducing the likelihood of misinterpretations or adverse consequences during tax assessments.

Scenario D: Information is Incorrect and No Feedback is Given

In cases where taxpayers identify incorrect information in the AIS but fail to provide feedback, the inaccuracies may persist, potentially leading to repercussions during tax assessments. Without corrective action, the incorrect information could be treated as correct by the department.

Failing to address incorrect information in the AIS may lead to discrepancies between reported income and actual transactions. It may lead to complexities during Tax Assessments and Scrutinies.

Arjuna (Fictional Character): Krishna,how does the new functionality work and what benefits does it offer to taxpayers?

Krishna (Fictional Character): Arjuna, In the AIS, taxpayers can provide feedback on each transaction displayed. This feedback allows them to comment on the accuracy of the information provided by the source of the transaction. If there is an error or misreporting, the feedback is automatically taken up with the source for confirmation.

With this new functionality, taxpayers will see several important attributes related to their feedback:

1. Whether feedback is shared for confirmation: This indicates if the taxpayer’s feedback has been forwarded to the reporting source for confirmation.

2. Feedback Shared On: This shows the date on which the feedback was shared with the reporting source.

3. Source Responded On: This indicates the date on which the reporting source responded to the feedback.

4. Source Response: This shows the response provided by the source, indicating whether the feedback was accepted or rejected and if any correction is required.

Arjuna (Fictional Character): Krishna,what kind of information is included in the AIS?

Krishna (Fictional Character): Arjuna,the AIS covers a wide range of financial transactions, including:

1. Detailed information about salary

2. Dividend Received

3. Interest from Savings Bank/Fixed Deposits

4. Interest from Income Tax Refund

5. Winnings from Lottery/Dream 11/MPL Poker/Junglee Rummy.

6. Receipts from Life Insurance Policy.

7. Share Market Transactions.

8. Any Business Receipts on which TDS is deducted.

9. Any Business Expenses on which TCS is collected.

10. Turnover as per GST Returns.

11. Payments related to foreign travel and remittances.

12. Purchase and Sale of Immovable Property.

Arjuna (Fictional Character): Krishna,what are some common errors that taxpayers might see in their AIS?

Krishna (Fictional Character): Arjuna, there are several types of errors that taxpayers might encounter in their AIS:

1. Duplicate Entries: Taxpayers might find inflated income in the AIS due to duplicate entries.

2. Previous Year’s Transactions: The AIS may report transactions from the previous financial year instead of the current one for which the return is due.

3. Property Sale with Multiple Owners: The AIS might show the total value of a property in each owner’s statement without reflecting their individual share.

4. Joint Accounts: The AIS may display the total interest earned from joint accounts, not splitting it among the joint holders.

5. Incorrect Income Attribution: Transactions that do not belong to the taxpayer might be mistakenly reflected in their AIS.

Arjuna (Fictional Character):Krishna, what lesson should the taxpayer take from this?

Krishna (Fictional Character):Arjuna, the introduction of this real-time feedback status functionality in AIS is another step by the Income Tax Department to simplify compliance and provide better services to taxpayers. It reflects a commitment to transparency and efficiency in tax administration. Timely review and feedback on any discrepancies or omissions can significantly streamline the tax filing process and ensure compliance with regulatory requirements. It’s essential for taxpayers to promptly provide any necessary corrections or additional information to tax authorities to avoid potential penalties and ensure their tax affairs are in order.