Income Tax Department Expands Annual Information Statement with New Data Sources

New Delhi: The Income Tax Department is broadening the scope of financial information required for taxpayers' annual information statements (AIS), bringing goods and services tax (GST) returns, foreign remittances for investment in mutual funds outside banking channels, and off-market securities transactions under the data net.

The department is also allowing relevant information from another taxpayer's income tax return besides ongoing and completed tax proceedings to get reflected in the AIS.

While data on normal remittances through legal banking channels is already available with the tax department through tax deducted at source (TDS) provision, the additional information will also tap investment in derivative markets and unlisted companies overseas through brokers and overseas agents which used to escape the income tax net earlier.

The Central Board of Direct Taxes (CBDT) has also authorised the Director General of Income Tax (Systems) to upload this information within three months from the end of the month in which it's received, according to the latest framework being prepared.

"The expanded data pool strengthens the department's ability to match income and transactions declared in tax returns with information generated elsewhere, increasing the possibility of discrepancies being flagged during tax-compliance checks," a senior official told ET.

The information will be used in the current scrutiny cycle and the next filing cycle, making tax evasion difficult for both companies. The sweep extends beyond transactions and information reported to the government by multiple agencies and financial intermediaries.

For instance, while data was already shared between GST and the IT department, it was used only in cases under scrutiny. Henceforth, the direct inflow of the transaction in the AIS is likely to nudge taxpayers to report income more accurately.

For investors, AIS can capture off-market transactions reported by depositories or registrars and transfer agents, dividends and mutual fund purchases reported by registrar and transfer agents (RTAs).

"The changes are made on the basis of analysis of tax evasion instances, and with the advanced data analytics being fully functional, evasion will become extremely difficult," the official said. "Going forward, more data will be reflected, including donations, giving taxpayers enough information to report their income correctly."

The provision allowing information contained in another taxpayer's ITR to be reflected in AIS is particularly significant. It gives the tax department a mechanism to bring relevant information reported in one taxpayer's return into the information trail of another taxpayer.

In the last three years, the department has widely expanded the data pool that goes into AIS, strengthening its ability to match income and transactions declared in tax returns with information generated elsewhere, increasing the possibility of discrepancies being flagged during tax compliance checks. This year, the department has included information regarding foreign income for filing returns.

Taxpayers will get a chance to contest information, if they find it incorrect. The income tax portal already allows taxpayers to view AIS through website or taxpayer mobile application and submit feedback if an entry is incorrect or duplicated. Responses can also be submitted through the department's offline utility.