Budget 2024: Checking Tax Information Simplified! Will the Scope of AIS Expand?

Budget 2024: The Annual Information Statement (AIS) was first introduced by the government in Budget 2021. The aim is to facilitate individual taxpayers' ability to verify their financial data in a single location and cross-reference it with the information they are completing on their income tax return. The statement provides a broad overview of the financial data needed to file an income tax return, including interest, dividends, capital gain transactions, and so forth (ITR).

Accessible AIS Information

By signing into their income-tax e-filing account, an individual can see their AIS information. Numerous organisations, including banks, brokerage houses, investment companies, registrars, financial institutions, and brokerage firms, are the sources of the data in AIS. If the taxpayer finds any inconsistencies, duplicates, or mistakes in the information given in the AIS, the tax department offers a mechanism for them to make comments.

AIS Introduction in November 2021

Since the AIS was introduced in November 2021, different incomes are reflected on the statement regardless of whether taxes are withheld from such income or not. Still, there are several areas where the AIS may be expanded, such as bank account reporting or consistent reporting of rental revenue from residential property.

For income tax authorities as well as people, AIS can be more useful if complete information is provided and expanded upon. A few areas where the data gathered in an AIS might be expanded in Budget 2024 are listed below:

Correct Value of Rental Income

When renters (workers) claim exemption from House Rent Allowance (HRA) through their employer, the AIS should accurately reflect the rental income received by persons (where received). Furthermore, the landlord's PAN is not represented in the Landlord's AIS/Form 26AS, despite the fact that it was recorded in the TDS statements filed by the employer (Form 24Q provided by the employer providing the landlord's PAN).

Since these transactions were exempt from Tax Deducted at Source (TDS), such income (if not shown in AIS) may remain unreported, particularly when the monthly rental income does not exceed Rs 50,000. It is important to note that the rental amount displayed may not match the actual amount paid, as it represents the exemption amount claimed by the tenant due to their employment.

In order to avoid disparities between the AIS and the ITR, it is imperative that the landlord's AIS accurately reflect the actual rent paid. Therefore, in order for the employer to record the actual rent that employees have paid as well as the HRA exemption amount, a change in Form 24Q is necessary. The AIS is a potential source for these numbers.

Interest on Income Tax Refund

The income tax refund and interest are recorded in the AIS as a single, combined sum. In certain situations, the tax department deducts TDS from the interest paid on the income tax refund; this TDS is subsequently shown on Form 26 AS. Individual taxpayers can obtain this information via Form 26AS or the notice they receive after their income tax return is processed, albeit, if the interest from their refund is not subject to TDS.

People could fail to disclose that interest received from income tax refunds is also subject to taxation. People frequently fail to disclose the interest on their income tax refund in their ITR as a result of this. Since the information is easily obtainable from the income tax department, interest received on the income tax refund can also be recorded in the AIS. Furthermore, a detailed comparison between the income tax refund and the related interest can be shown.

ITR Disclosure Requirements

It is mandatory for individuals to disclose in their ITR any directorships they hold and any unlisted shares they own at any time throughout the fiscal year. To obtain this data from businesses, it is therefore advised to include a special component in the AIS. Such a contribution would accomplish two goals:

Decrease the number of cases of non-reporting and assist the department in balancing an individual's claimed income on their ITR with their assets. To further easily connect this data with the AIS, the tax department can think about establishing a reporting system with the Registrar of Companies, such as the Statement of Financial Transactions (SFT). This strategy would improve data quality and expedite the reporting procedure even more.

Unlisted Shares and Capital Gains Tax

The sale of unlisted shares is liable to capital gains tax since they are considered an asset. Tax authorities are better able to follow these transactions when unlisted shares are included in the AIS as sale and purchase data. Additionally, precise reporting of such transactions by individual taxpayers would improve tax compliance. At the moment, only information regarding the sale and purchase of mutual funds and listed equity shares is reflected in AIS.

Dividend Income Underreporting

An individual's dividend income, which has previously been subject to underreporting in ITRs, is disclosed by the AIS. An ability to obtain a quarterly breakdown of dividends can be added to improve accurate income reporting.

An already-beneficial component of the AIS is the quarterly breakdown of capital gains and losses. The system's usability would be improved by adding a feature comparable to this one for dividends, which would make it simpler for corporations and individuals to declare dividend income in their ITRs. This would assist people in appropriately calculating advance tax and avoiding penalties.

Savings Interest Income

The income from savings interest collected on a bank account is captured by AIS. Additionally, it gives the account number and name of the bank that is granting the interest. Nonetheless, the taxpayer is required to report the bank's IFSC on the ITR form in addition to the account type, account number, and bank name.

Since the IFSC is not included in the AIS, it will take more work on the part of the individual taxpayer to obtain the information from the bank in order to submit it. Therefore, the bank's IFSC reporting in the AIS, coupled with interest revenue and other data, may make it easier for an individual taxpayer to fill out the ITR form.

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