Annual Information Statement (AIS) – Overview | Recommendations | Global Best Practices

The Annual Information Statement (AIS) is a comprehensive statement containing details of all the financial transactions undertaken by an individual in a financial year. It is an initiative by the Income Tax Department to provide taxpayers with a consolidated view of their financial transactions, which helps them in filing accurate income tax returns (ITRs).

Key Features of AIS
– Comprehensive Information: AIS provides a complete overview of all financial transactions, including income, investments, and expenditures.
– Transparency: Enhances transparency in financial dealings and ensures that all financial activities are reported.
– Pre-filled ITRs: Helps in pre-filling the income tax return forms, making the filing process easier for taxpayers.
– Error Detection: Enables taxpayers to detect and rectify any discrepancies in the information reported.
– Regular Updates: AIS is updated regularly with information received from various sources like banks, mutual funds, and other financial institutions.

Components of AIS
Part A: Contains general information like PAN, Aadhaar number, name, and date of birth.
Part B: Contains the details of various financial transactions categorized into different sections such as:
– TDS/TCS Information
– SFT Information
– Payment of Taxes
– Demand and Refund
– Other Information

By Divya Baweja – Partner, Rohinton Sidhwa – Partner & Amit Bablani – Partner | Deloitte India

Table of Contents

1. AIS: Introduction and Overview
2. Success of the existing AIS system coupled with other digitisation initiatives of the Indian
   Government
3. Recommendations for improvement of AIS functionality
4. Existing sources of information and global best practices to enhance AIS functionality

1. AIS: Introduction and Overview

2019: Introduction of pre-filled tax returns based on the information in Form 26AS

2020: Introduction of AIS

• Extension of Form 26AS
• Objectives of AIS
• Feedback Mechanism
• Mechanics

2021: Expansion on coverage of information captured in pre-filled tax returns basis AIS

2. Success of the existing AIS system coupled with other digitisation initiatives of the Indian
Government

• 12x Jump in reported information with addition of information of about 3 crore people
• 2x Increase in reported transactions from 70 crore in AY 2016-17 to 144 crore in AY 2022-23 due to increase in TDS codes
• 2x Increase in number of deductees from 4.8 crores in AY 2016-17 to 9.2 crores in AY 2022-23
• 6.11% India’s direct-tax GDP ratio for year 2022-23 due to surge in tax revenues
• 16.1% More ITRs filed for AY 2023-24 till July 2023 as compared to AY 2022-23

The tax department’s e-campaigns have significantly improved voluntary compliance, with a substantial reduction in non-filers and a notable increase in the filing of updated tax returns. Till January 2024, the tax department has garnered about INR 4,600 crore in taxes from 56 lakh updated returns filed in the past two years.

2.1 Taxpayers Benefits

1. Pre-filled tax returns
2. Seamless filing and reduced instances of non-compliance in tax returns
3. Mechanism to provide feedback and thus reduce unnecessary litigation
4. Nudges towards voluntary compliance
5. Faster processing of taxpayers’ tax return and quicker refunds

2.2 Tax Department Benefits

1. Information driven tax audits
2. Better detection of non-filers of tax return
3. Lower administrative costs as manual intervention is limited
4. Better detection of tax evasion cases
5. Highlight accurate and prompt collection of taxes

3. Recommendations for improvement of AIS functionality

3.1 Areas of improvement

1. Inclusion of purchase and sale date of shares and securities
2. Bifurcate tax refund in principal and interest and inclusion of interest omitted
3. Inclusion of actual rent paid instead of exemption claimed
4. Incorporate tax payments in AY to which it pertains
5. Only verified information to be used
6. Make available complete information before filing of tax return

3.2 Introduce Additional Data Points

1. Integrate tax saving investments such as section 80C, 80D, 80G etc.
2. Include details on directorships and ownership of unlisted shares
3. Incorporate sale and purchase data of unlisted shares
4. Incorporation of intra-day transactions
5. Incorporate details on outstanding demands, pending refunds and unclaimed TDS
6. Auto-populate data available with MCA and items of tax audit report

4. Existing sources of information and global best practices to enhance AIS functionality

4.1 Improved AIS functionality

Existing sources of information

• Reserve Bank of India
• Ministry of Corporate Affairs
• Securities and Exchange Board of India
• Central Board of Indirect Taxes and Customs
• Registrars/Subregistrars
• Valuers
• Specified Financial Transactions

Leverage from global best practices

• Connected data systems
• Standard Business Reporting
• Standard Audit File for Tax
• One taxpayer One Govt View
• Crypto-Asset Reporting Framework
• Common Reporting Standard
• DPI MCAA