How will the New IT Annual Information Statement affect taxpayers?

An annual Information Statement (AIS) is an extensive statement of a taxpayer’s information. It provides a record of digital transactions in a year. It is similar to Form 26AS, but with substantially more information. Form 26AS is an annual statement that contains information of tax collected by your collectors, details of tax deducted at source (TDS), any advance tax that you have paid, information regarding any refund that you received, self-assessment tax payments, any regular assessment tax deposited by you, and any information regarding high-value transactions related to mutual funds, shares, or any other major transactions.

The AIS is even more detailed than Form 26AS, as it reflects details of income where taxes are not withheld and financial transactions that a taxpayer has made in a year. The primary aim of AIS is to encourage transparency of information between the income tax department and the taxpayer. A taxpayer can check their AIS anytime and also offer any feedback if they want to. AIS also ensures that compliance is voluntary, as they display complete information online. Also, as a tax-payer, your different types of income tax returns are seamlessly pre-filed. You can simply enter the details in the income tax calculator and know the tax payable.

Features of AIS

The primary objective of creating the AIS has been to encourage more transparency between the taxpayer and the income tax department. Here are some features of the AIS-

  • The AIS includes new information that was overlooked in Form 26AS. Interest on deposits, mutual fund transactions, dividends, foreign remittance information, and transactions involving securities are some of the new information included.
  • Taxpayers can submit feedback online on the AIS’s information and also download the information they see.
  • The AIS Utility is a feature that allows taxpayers to view their AIS and also upload any feedback offline if needed.

Structure of the AIS

The information on the AIS is reflected in two parts, part A and part B.

  • Part A
    Part A reflects the general information of a taxpayer, like PAN, name, masked Aadhaar number, date of birth/incorporation/formation, along with contact details of the taxpayer.
  • Part B
    Part B is divided into different aspects and includes reports of income and information on financial transactions. It includes information on payment of taxes and details relating to refund. It also comprises information of TDS and TCS, payment of taxes like advance tax and self-assessment tax, demands or refunds during a financial year, purchase of foreign currency, interest on refund, and any other information received from other sources. The details received from reporting entities under Statement of Financial transaction (SFT) are also included.

The AIS’s impact on taxpayers 

The AIS is quite helpful to a taxpayer when he is assessing his advance tax requirement. It helps the taxpayer in filing returns easily since all the information provided by the AIS is readily available to a taxpayer. Through the AIS, you know the investments and income you made for a particular financial year. Using this information, you can simply total the income received and deduct any investments or exemptions using an income tax calculator and know your taxable income. In the absence of an AIS, you would have to collect all the information regarding your taxes and income by yourself, which can be a hassle for most people.

All your digital transactions are reported on the AIS and are available to the income tax department. However, there can be some sources of income and important financial transactions that are conducted offline, especially among entrepreneurs and sole proprietors. Hence, if you are someone whose income has an offline component, you cannot completely rely on the AIS for all your income details. You can verify the details mentioned and report if there are any errors in it. The AIS has an option where you can notify any updates or changes in the digital transaction mentioned and it will notify the income tax department about the same.

An advantage of the AIS is that they report all digital transactions, irrespective of whether they have any tax implications. In the past, many taxpayers have failed to report interest income as they were not reported in Form 26AS. With the AIS, be it income or deductions, there is transparency in all digital transactions.