What are the new changes introduced in Form 26AS? Will they help?

Published: July 27, 2020 at 3:22 pm

Recently, the Income Tax Department introduced some key changes in Form 26AS. What used to be a simple tax credit statement available to every taxpayer is now a complete blueprint of your high-value financial transactions. What are the new changes in form 26AS? Will they help the taxpayer?

About the author: Anjesh Bharatiya is a 30+ taxman by profession and a Chemical Engineer by education. He has been an investor in the stock market since age 15! He likes to write about personal finance, stock markets, government policies, taxation, philosophy and football.

Also by Anjesh: (1) Want to trade in stocks? Here is how your income will be taxed(2) How to use Tax benefits on HRA and home loans (3) How to get tax benefits under a Hindu Undivided Family (HUF)

Financial information that is available exclusively to the Income Tax Department will now be displayed in the Form 26AS so that the taxpayer can properly account for his transactions before filing his return of income. This is likely to increase transparency between the Department & the taxpayer and if utilized correctly by the taxpayer, will also result in minimizing the likelihood of the taxpayer receiving any notice or adversarial communication from the Department. Let’s have a look at the new information that will now be available in your Form 26AS:

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New information and parts of the new Form 26AS

The Income Tax Department receives various specified high-value transactional information from various sources like Banks, Mutual Funds and other such Financial Institutions. This information, called as Statement of Financial Transactions (SFTs), will now be displayed in the new Form 26AS. The new Form 26AS has the following changed sections and new information:

  1. Part A2: This section used to have details of tax deducted at source on sale of immovable property u/s 194IA/ TDS on rent of property u/s 194IB (for seller/landlord of property). Now this section will also include details of TDS deducted if you have received income from contractor business and any profession. No information will be available if no TDS was deducted.
  2. Part E: This section has been renamed to “Details of SFT Transaction”. Earlier, this part used to display AIR Information which was also related to high value transactions but did not include all types of financial transactions. The SFT Transactions are much more comprehensive and include the following 14 types:

SFT- 001: Purchase of bank drafts or pay orders in cash (if more than Rs 10 lakh in a year)

SFT- 002: Purchase of pre-paid instruments in cash (if more than Rs 10 lakh in a year)

SFT- 003: Cash deposit in the current account (if more than Rs 50 lakh in a year). This includes deposits through bearer cheques. It also includes cash withdrawals aggregating to Rs 50 lakh or more.

SFT- 004: Cash deposit in account other than current account (if more than Rs 10 lakh in a year). This includes deposits through bearer cheques.

SFT- 005: Time deposit (if more than Rs 10 lakh in a year). This includes sweep-in/sweep-out fixed deposits. Each time a new sweep-in FD is created, the system records it as a new time deposit. So, don’t be alarmed if you see a very large value under this code in your Form 26AS.

SFT- 006: Payment for credit card (if more than Rs 10 lakh in a year through non-cash methods. Limit is Rs 1 lakh for cash payments)

SFT- 007: Purchase of debentures (if more than Rs 10 lakh in a year)

SFT- 008: Purchase of shares (if more than Rs 10 lakh in a year)

SFT- 009: Buyback of shares (if the tendered value is more than Rs 10 lakh in a year)

SFT- 010: Purchase of mutual fund units (if more than Rs 10 lakh in a year)

SFT- 011: Purchase of foreign currency (if more than Rs 10 lakh in a year)

SFT- 012: Purchase or sale of immovable property (if more than Rs 30 lakh in a year). Even if you purchased/sold the property for less than Rs 30 lakh but the value by stamp valuation authority was Rs 30 lakh or more, the higher value will be displayed here. Please note that even if you sell a property below Stamp Duty Value, sale consideration for the purpose of calculating capital gains will be the Stamp Duty Value (unless the Stamp Duty Value is less than 110% of the consideration received). Even for the buyer, if he purchases a property below Stamp Duty Value such that the Stamp Duty Value exceeds the amount paid by 10% or Rs 50,000 (whichever is higher), the difference will be taxed as “Income from other sources”. Therefore, it is always advisable to sell/buy immovable property at least at the Stamp Duty Value.

SFT- 013: Cash payment for goods and services (if more than Rs 2 lakh in a year)

SFT- 014: Cash deposits during a specified period of 9th Nov to 30th Dec 2016 (if more than Rs 12.5 lakh in a current account or Rs 2.5 lakh in other accounts)

The following details will be available in Part E regarding the above transactions:

  • Type of transaction
  • Name of SFT filer
  • Date of transaction
  • Single/joint party transaction
  • Number of parties
  • Amount
  • Mode of payment
  1. Part F: This part is analogous to Part A2 mentioned above and refers to the same transactions from the buyer’s/payer’s side. It used to have details of tax deducted at source on sale of immovable property u/s 194IA/ TDS on rent of property u/s 194IB (for buyer/tenant of property). Now this section will also include details of TDS deducted if you have made payment to any contractor or any professional.

Final word:  The revamped Form 26AS is another move by the Income Tax Department to facilitate the taxpayers and avoid any unnecessary proceedings. To be clear, the Income Tax Department already used to have all the specified information. The only thing that changes is that now the assessee can view the information in a consolidated manner. The Department already issues notices to people whose transactions and income don’t match. However, the taxpayer now has an opportunity to properly reflect these transactions in his return of income. If the transactions match your financial profile and income tax returns filed, then an honest taxpayer need not have any worries.

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