Income tax returns: What makes Form 26AS crucial & what not to miss to ensure your filing is stress-free

One of the most important digital initiatives of tax authorities has been providing 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 at Deloitte India, says, "Form 26AS has been significantly re-designed 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."

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 and corresponding tax details in one consolidated place. Without 26AS, it will be difficult to reconcile and keep track of quarterly withholding tax certificates issued by each payer separately;
• It helps ensure completeness in the tax return filing by making correct gross amounts of income from different payers available upfront – receipts in the bank account could be after tax has been deducted, so the accurate amount is reported;
• It assists taxpayers in claiming the correct amount of credits for tax deducted or collected by various parties – this information may be scattered across various credit advices, invoices, etc.;
• Reporting based on Form 26AS ensures that the automatic processing of tax returns is not affected by mismatches;
• Incorrect reporting of income and tax details by various parties in the taxpayer’s name (e.g., tenants paying rent, employers paying salary, banks paying interest, etc.) can be flagged upfront for correction with the respective parties on a timely basis;
• Ultimately, the above leads to fewer chances of receiving unpleasant tax notices from authorities seeking to levy additional tax or interest demands.

As can be seen, 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 advantage of this information source.