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AIS information can be accessed by logging into the individual’s income-tax e-filing account. The data in AIS is sourced from various organisations such as financial institutions, banks, brokerage firms, investment companies, registrars, etc. The tax department provides a facility to the taxpayer for giving feedback if there are any discrepancies or duplications or errors in the data reported in the AIS.
Since the introduction of AIS in November 2021, the statement reflects various incomes irrespective of whether tax is deducted on such income or not. However, there are few areas to expand the AIS like reporting of bank accounts or consistency in reporting rental income from house property.
Providing all information and expanding the information captured through AIS can enhance its utility for both individuals and income tax authorities. Below are few areas where the information captured in an AIS could potentially be expanded in Budget 2024:
1. Correct value of rental income
The AIS should consistently reflect the rental income received by individuals (where received), particularly in cases where tenants (employees) claim House Rent Allowance (HRA) exemption via their employer. Additionally, even though the landlord’s PAN was recorded in the TDS statements filed by employer (Form 24Q submitted by the employer providing the landlord’s PAN), it is not reflected in the Landlord’s AIS/Form 26AS. Such income (if not reflecting in AIS) may go unreported, especially when the monthly rental income does not exceed Rs 50,000, as these transactions were not subject to Tax Deducted at Source (TDS).
However, it’s worth noting that the rental amount reflected is the exemption amount claimed by the tenant as an employee, which may differ from the actual rent paid. Therefore, it is essential to reflect the actual rent paid in the landlord’s AIS to prevent discrepancies between the AIS and the ITR. Hence, a correction in Form 24Q is required, for the employer to report the actual rent paid by employees along with the HRA exemption amount. These figures can be then sourced from the AIS.
2. Interest on income tax refund
The income tax refund along with interest on such refund is captured as a consolidated amount in the AIS. The tax department in some cases deducts TDS on the interest paid on the income tax refund, then this TDS is reflected in Form 26 AS. However, in case the interest from income tax refund is not subject to TDS then individual taxpayers would be able to get this information from the intimation (received after processing of the income tax return) or Form 26AS. Individuals may miss to report interest earned from income tax refund is taxable as well. This often leads to individuals not reporting the interest on income tax refund in their ITR.
Interest earned on the income tax refund can also be documented within the AIS as the data is readily available with income tax department. Also, a clear breakdown between the income tax refund and the associated interest, can be provided.
3. Directorships and unlisted shares
Individuals are obligated to report their directorships and ownership of unlisted shares held at any point during the financial year in their ITR. Therefore, it is advisable to introduce a dedicated section within the AIS to capture this information from companies. Such an inclusion would serve a dual purpose: reduce instances of non-reporting and aid the department to reconcile the assets held by an individual with the income declared in their ITR.
Additionally, the tax department may consider implementing a reporting mechanism with the Registrar of Companies, (like Statement of Financial Transactions (SFT)), to seamlessly link this data with the AIS. This approach would enhance data accuracy and further streamline the reporting process.
4. Sale and purchase data of unlisted shares
Unlisted shares are an asset and their sale is subject to capital gains tax. By including unlisted shares sale and purchase data in the AIS, tax authorities can better track these transactions. It would also help individual taxpayers to report such transactions accurately resulting in better tax compliance. AIS currently reflects information only about sale and purchase of listed equity shares and mutual funds.
5. Details of dividend income
The AIS provides information regarding dividend income received by an individual, which was historically prone to under-reporting in ITR. To enhance correct reporting of income, an option to download a quarterly breakdown of dividends can be introduced. The AIS already offers a useful feature that breaks down capital gains and losses, on a quarterly basis. A similar feature for dividends would enhance the system’s usability, making it easier for individuals and corporates, to report dividend income in their ITR. This would help individuals to compute advance tax accurately and avoid penalty.
6. Reporting of IFSC of Bank account
AIS captures the savings interest income earned from a bank account. It also provides the name of the bank and account number from which such interest is received. However, the ITR form mandates the taxpayer to report the IFSC of the bank along with account type, account number and name of the bank. The IFSC is not mentioned in the AIS and an individual taxpayer needs to put additional effort to source the IFSC from the bank to report it. Hence, reporting of IFSC of the bank in the AIS along with interest income and other information could ease the filling of the ITR form for an individual taxpayer.
(the article is written by Bhavin Rajput, Director, Deloitte Haskins & Sells LLP, Monil Gangar, Manager, Deloitte Haskins & Sells LLP, Swapnil Desai, Deputy Manager, Deloitte Haskins & Sells LLP.)
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