Income tax – Form 26AS To Be Replaced With Annual Finance Statement

Budget 2020 introduced to replace Form 26AS with a new Annual Financial Statement in order to  prevent tax evasion and bring clarity among taxpayers

This will include details such as:-

As per Section 203AA, Form 26AS currently provides details of TDS and other prepaid taxes that are paid to the government against one’s PAN (Permanent Account Number) and it is available for verification on the website of the income tax department.

The budget for the financial year 2020-21 implemented the introduction of Section 285BB.  As per the agreed contours,  the idea is to  include a detailed financial statement  comprising of all  important financial transactions conducted by an individual in a particular year, such as  

  • Sale or Purchase of Property &
  • Sale or Purchase of Securities

to be reflected  in the prepopulated ITR’s or Income tax Return.

Annual Finance Statement will also include other financial information such as

  • Sale or purchase of immovable property
  • Stock or shares held by Income tax authority. 

Therefore, Section 203AA will be deleted and Form 26AS will be replaced by Annual Finance Statement.

The State has yet to inform the specification of this new financial statement. The proposed amendment is set to take effect from 1 June 2020.

Once this amendment is ther through there will be a big change for banks and mutuals funds  as they would have to share all the details on transactions being conducted by individuals during the year related to a particular PAN no. or Aadhar NO. 

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100% Tax Exemption on Investment in Sovereign Funds

100% Tax Exemption on Investment in Sovereign Funds National Infrastructure Pipeline (Section 80-IA)

Per Budget 2020, FM has announced a 100 percent tax exemption on the returns on Investment made in National Infrastructure Pipeline( Allocated Rs 103 Cr.) informs both equity & debt. It’s available to sovereign wealth funds, namely Abu Dhabi Investment Authority as well as any entity wholly owned and controlled, directly or indirectly, by a foreign government.

 Sovereign funds, willing to invest in India’s story in Infrastructure growth, can write to the Finance Ministry along with their project details as it enables choice for funds to invest through incorporated entities rather than investing directly. Every case based on merits of the details will be vetted by the Department of Revenue  and as per the scheme, Sovereign funds will be notified for exemption under Section 80-IA of the Income Tax Act.

Tax exemption for the Infra. Related Instruments will cover –

  • Dividend
  • Interest or
  • Long-term capital gains arising from a debt or equity

 The major condition is that Invested Funds should be used in a “company or enterprise carrying on the business of developing, or operating and maintaining, or developing, operating or maintaining any infrastructure facility” as specified by the law.

  • The infrastructure projects will include:
  • Road, a bridge or a rail
  • Highway project including housing or other activities being a part of the highway project.Water supply project, water treatment system, irrigation project, sanitation, and sewerage system or solid waste management system.
  • Port, airport, inland waterway, inland port or navigational channel in the sea.

The investment needs to have been made before March 31, 2024, and held for at least three years.

A hundred percent deduction for any profits and gains from an investment will be available for 10 consecutive years, according to the Finance Bill.

National Infrastructure Pipeline Project timelines broadly cover a time frame from 2019-20 to 2024-25. These projects have been identified in sectors such as energy, roads, railways, ports and airports, digital infrastructure projects, mobility projects, irrigation, rural, agriculture and food processing.

Projects worth about Rs 25 lakh crore have been identified in the energy sector followed by road projects worth Rs 20 lakh crore.

Some of the other funds that eye to invest in the Govt of India scheme are:-

  • Norway’s Government Pension Fund Global with $1.2 trillion in investments
  • Singapore’s Temasek—an investment fund with a $313-billion portfolio.
  • Public Investment Fund of Saudi Arabia
  • Mubadala Investment Company of UAE
  • GIC Pvt. Ltd., Kuwait Investment Authority,  & Temasek Holdings

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Challenges faced at GST Process

GST Imperative for Small & MSME’s

  • No Facility to Amend or Revise the Returns
  •  Back to Back Returns per month filing or Quarterly submissions instead of Single Comprehensive Annual return
  •  Payment of Taxes and Filing of Return with the same due date
  •  Payments of Tax under different heads often leading to a lot of confusion in terms of set-off and the overall incidence
  •  Setoff of taxes often precede in importance compared to Tax Payment Date, thereby the process getting diluted
  •  Late Fees being levied at the initial stages with stringent overall process thereby negative responses
  •  Lack of Trust in filers, training gaps in dealers and distribution channels along with many procedures, Document & Returns
  •  GSTN software issues often failing and the government’s stance of not acknowledging the same
  •  Forms & Utilities often released late without proper planning
  •  Input credit often a point of debate as the onus lies on business, with severe penalties and cash crunch due to the model of low acceptance and no cross-verification of sellers for input
  •  No Dedicated helpline, Inadequate resources to look into the shortcomings to date

Thus Course Correction in System, process n model is required urgently to instill trust and confidence in the Community

Latest Updates

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  • Filing your income tax return early this year? Understanding these 5 essential points is crucial.
    Filing your income tax return early this year? Understanding these 5 essential points is crucial. It is precisely 45 days since the end of the 2023–24 fiscal year, and there are 75 days remaining before the July 31 deadline for filing income tax returns (ITRs). This is a great moment for an individual […]
  • CBDT Introduces Enhanced Feature in Income Tax AIS: Track Your Correction Request Status Now
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  • Understanding the Consequences of Incorrect HRA Declarations
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