One of the most important digital initiatives of tax authorities has been to provide Form 26AS to each taxpayer. Known as the Annual Tax Statement, Form 26AS combines all incomes and corresponding taxes for the taxpayer for a given financial year (FY), as reported to tax authorities.
Alok R Agrawal – Partner, Deloitte India, says: "Form 26AS has been re-designed significantly over the years. Presently, it provides details on vital aspects such as tax deducted from income sources (salary, interest, rent, dividend, sale proceeds of house property, etc.); income where taxes are not deducted or NIL (taxpayer has filed Form 15H or 15G); tax deducted from sale proceeds of virtual digital assets, tax collected on special transactions such as foreign remittances, purchase of car, overseas travel; interest on prior year tax refunds; demands due to defaults in tax withholdings by taxpayer, etc."
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Before filing an annual personal tax return, it is crucial to check Form 26AS for several reasons. Some are outlined below:
* Form 26AS provides all income/ corresponding tax details at one place in consolidated manner. Without 26AS, it will be difficult to reconcile/ keep track of quarterly withholding tax certificates issued by each payer separately;
* Helps to ensure completeness in the tax return filing by ensuring correct gross amounts of income from different payers is available upfront – receipts in the bank account could be after tax has been deducted so that accurate amount is reported;
* Assist taxpayers in claiming correct amount of credits for tax deducted or collected by various parties – this information may be scattered across various credit advices, invoices, etc. otherwise;
* Reporting based on Form 26AS ensures that the automatic processing of tax return is not affected by mismatches;
* Incorrect reporting of income and tax details by various parties in taxpayer’s name (e.g., tenants paying rent, employer paying salary, banks paying interest, etc.) can be flagged upfront for correction with the respective parties on timely basis;
* Ultimately, the above leads to lesser chances of receiving unpleasant tax notices from authorities seeking to levy additional tax/ interest demands.
As can be seen from above, Form 26AS is a powerful tool provided by tax authorities that simplifies the process of preparing and filing tax returns accurately. Taxpayers should take full benefit of this information source.