New form 26AS – Impact on ITR filing

Impact of new form 26AS on ITR filing

Until now the salaried persons investing in stocks and trading on a daily basis could avoid furnishing the details pertaining to such transactions to the Income Tax Department. The reasons behind non submission of such information may be due to  the fear of filing complicated ITR other than the regular ITR-1, escaping the tax liability by not mentioning income received from such trading, avoiding the cumbersome calculations pertaining to capital gains or losses accrued during a financial year or just because of ignorance on the part of the individual regarding any such liability.

While presenting the Finance Bill 2021, the FM announced the pre-filing of ITRs with respect to the details of capital gains from listed securities, dividend income and interest from banks, post offices,etc for the purpose of making the process of return filing easier. Accordingly the CBDT issued a notification ( NO.16/2021) dated 12th March, 2021 that requires a specified category of persons to furnish a statement of financial transaction u/s 285BA of the Income Tax Act pertaining to capital gains on transfer of listed securities or units of mutual funds, dividend income and interest income. The companies issuing shares and mutual funds etc are required to furnish the Statement of Financial Transaction, for certain transactions amounting to Rs.10 lakh or more. 

The advantage of not revealing the capital gains arising from trading in stocks would not be available any longer. The Income Tax Department got the details of income from sources under the head: salary, interest on bank fixed deposit along with taxes paid from the respective sources. All these information were given in form 26AS. Now onwards the IT Department will get information pertaining to capital gains or losses, dividend income and interest on Post Office deposits and interest earned from Deposits in NBFCs in Form 26AS. The latter shall be available now in a new format. 

Effect on taxpayers: Be it the mere ignorance of the taxpayers or their intention to avoid taxes behind not submitting the gains/losses from stock trading and thereby escaping tax, now the Department shall closely monitor them through data analytics. The taxpayer has to be more vigilant when details of income are given in the ITR.

In accordance with the notification, the Tax Department requires the following category of persons to report certain transactions:

1.Capital gains on transfer of listed securities or units of Mutual Funds

  • Recognised Stock Exchange such as BSE, NSE, etc.
  • Depository defined Depositories Act, 1996
  • Recognised Clearing Corporation
  • Registrar to an issue and share transfer agent registered under SEBI

2.Dividend Income

  • Company distributing such dividend.

3.Interest Income

  • A banking company or a co-operative bank covered under the Banking Laws
  • Post Master General defined under the Indian Post Office Act, 1898
  • Non-banking financial company which holds a certificate of registration under the RBI Act, 1934.

Thus, the broad coverage in ITR Form26AS is implemented to ensure that taxpayers do not evade any tax, Knowingly or unknowingly and the onus of declaration is on their part regarding capital gains/losses.  

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Krishna Rath is a SEBI Registered Investment Adviser, and since 2015 has been educating netizens on investments and insurance. Krishna is a fee only SEBI RIA and is Odisha's first SEBI RIA. With background in IT, Krishna is changing the advisory space with new innovations in AdvisoryTech.

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