The income tax department will have information for the just concluded financial year (2020-21), which can be verified against income tax returns filed by taxpayers.

Starting this financial year (2021-22), tax sleuths will have direct access to information related to capital gains from the sale of mutual funds, dividends received on shares and interest earned by investors on bank and post office savings or deposits, which is likely to plug revenue leakage and check non-declaration of such income.

Last month, the income tax department issued a notification in this regard, emphasising that stock exchanges, depositories, clearing corporations and registrars to an issue and share transfer agents among intermediaries that will be required to provide details of capital gains made on listed securities and mutual funds.

Companies are required to provide information on dividends paid while banks, post offices and non-banking finance companies (NBFCs) must give details on interest earned.

Simply put, if an investor has redeemed mutual fund units and earned capital gains, the same information will be reported by the fund house to the tax department. Furthermore, interest earned on bank or post office deposits will also be informed to the tax authorities.

More importantly, tax authorities will have details for the just concluded financial year (2020-21), which can be verified against income tax returns filed by taxpayers. Plus, the income tax department will share this information with taxpayers.

In her third Budget in February, Finance minister Nirmala Sitharaman had announced easing the filing of returns and details such as capital gains, dividend income interest from banks and post offices will be automatically filled in tax forms for taxpayers.

Currently, long-term capital gains on shares and mutual funds in excess of Rs 1 lakh a year is taxable. Dividends, interest and short-term capital gains are added to income and taxed at the marginal rate applicable to the taxpayer. Worth mentioning here is that due to lack of cross-referencing of these details resulted in under-reporting and potential evasion of taxes.

Tax sleuths used to seek details from the Securities and Exchange Board of India (Sebi) on select individuals in special cases. However, this was mostly related to high-value transactions where taxman felt the market entities had understated their gains.

The tax department had inked a data-sharing pact with the market regulator last year to examine details of transactions by traders.

Sumit Mangal, partner, L&L Partners, told ET: “The tax department can now verify the income reported in tax returns with this data and issue notice in case of discrepancies. The tax department can also track cases where investors generated substantial returns in the IPO (initial public offer) frenzy but did not report such gains in their tax returns.”