The Interim Budget 2024-25 will be presented by Finance Minister Nirmala Sitharaman on February 1 and experts indicate that major tax changes are unlikely.
However, some incremental changes can be expected in the budget, which will help streamline the process of income tax return (ITR) filing.
One of the expected changes includes expanding the scope of the Annual Information Statement or AIS, introduced in Budget 2021. It may be noted that the Annual Information Statement (AIS) is a document introduced by the government to simplify the process for individual taxpayers to review their financial information in one place.
The primary objective of the AIS is to enable taxpayers to cross-verify the financial data provided in their income tax returns easily.
Bhavin Rajput, Director, Deloitte Haskins & Sells LLP, wrote in The Economic Times that the scope of AIS could be expanded to include more details such as the correct value of rental income, interest on income tax refund, and more.
Rajput wrote that the AIS currently reflects rental income received by individuals, particularly in cases where tenants claim House Rent Allowance (HRA) exemption. However, he noted that discrepancies may arise, especially when the monthly rental income falls below the TDS threshold.
To address this, incorporating the actual rent paid in the landlord’s AIS, sourced from corrected Form 24Q submissions by employers, would ensure accurate reporting.
On interest on income tax refunds, he said the AIS captures income tax refunds along with associated interest, there is room for improvement.
“The income tax refund along with interest on such refund is captured as a consolidated amount in the AIS. The tax department in some cases deducts TDS on the interest paid on the income tax refund, then this TDS is reflected in Form 26 AS. However, in case the interest from income tax refund is not subject to TDS then individual taxpayers would be able to get this information from the intimation (received after processing of the income tax return) or Form 26AS,” Rajput wrote.
“Individuals may miss to report interest earned from income tax refund is taxable as well. This often leads to individuals not reporting the interest on income tax refunds in their ITR. Interest earned on the income tax refund can also be documented within the AIS as the data is readily available with the income tax department. Also, a clear breakdown between the income tax refund and the associated interest can be provided,” he added.
Rajput also added that AIS can include details about directorships and unlisted shares. He said individuals have to report their directorships and ownership of unlisted shares held at any point during the financial year in their ITR.
Therefore, he recommended the introduction of a dedicated section within the AIS to capture this information from companies.
“Additionally, the tax department may consider implementing a reporting mechanism with the Registrar of Companies, (like Statement of Financial Transactions (SFT)), to seamlessly link this data with the AIS. This approach would enhance data accuracy and further streamline the reporting process,” he added.
He also said that the AIS could include income information related to the sale and purchase of unlisted shares, details of dividend income, and reporting of IFSC of a bank account.
These changes are likely to benefit taxpayers by streamlining the return filing process. However, despite being a pre-election budget, experts and economists do not expect any major changes that would reduce the income tax burden on taxpayers.
