AIS Mismatches Leading to Incorrect Tax Reporting and Scrutiny

Taxpayers across India are facing increasing challenges with the Annual Information Statement (AIS), as discrepancies and data mismatches continue to trigger scrutiny and raise the risk of erroneous tax notices. Despite being introduced to simplify compliance and increase transparency, the AIS is now causing confusion due to errors in reporting by third-party data sources.

What Is AIS?

The AIS is a comprehensive summary of a taxpayer’s financial transactions, compiled using data from banks, registrars, depositories, and sub-registrars. It includes information on capital gains, interest income, real estate transactions, and more. However, inaccuracies in this data are resulting in unintended consequences for honest taxpayers.

Key Issues Faced by Taxpayers

Capital Gains Mismatch

Depositories often report the stock’s closing price instead of the actual transaction price.
Example: A taxpayer sells a stock at ₹100, but AIS reflects ₹101. This ₹1 discrepancy, though minor, can prompt scrutiny.

Real Estate Mismatch

Income statements frequently show the full property value under each co-owner’s PAN, even when only one person paid.
Example: A ₹1 crore property jointly registered by a couple may be reported as ₹2 crore in total, doubling the declared value and leading to potential tax notices.

FD Interest Errors

When interest is received on maturity, AIS may inaccurately reflect the entire amount in the final year—even if taxed annually earlier.
Example: A ₹5 lakh FD earning ₹35,000 interest per year totals ₹1.75 lakh over 5 years. If the AIS reflects the full ₹1.75 lakh again in the fifth year, it results in duplication and inflated income.

What Can Taxpayers Do?

Taxpayers can submit feedback and flag mismatches via the incometax.gov.in portal.
Steps to report mismatch:

Log in and go to the Compliance Portal under Pending Actions
Select AIS tile and financial year
Pick the transaction and click ‘Optional’ under ‘Provide Feedback’
Submit your response and save the reference ID

Points to Remember

Reconcile income with Form 26AS, AIS, and TIS
Flag discrepancies immediately
Keep all documentation handy
File returns even if AIS contains errors
Be ready to justify entries in case of inquiries

Experts Suggest Reforms

Tax professionals and stakeholders are urging the Income Tax Department to:

Expand feedback options for jointly owned or gifted assets
Ensure accuracy in data reporting by third parties
Issue clear circulars acknowledging known system flaws and instructing taxpayers on corrective action

As taxpayers navigate another filing season, the need for a more robust, error-free AIS framework has never been more pressing. Authorities are being urged to act swiftly to ensure the system achieves its goal of simplifying tax compliance, not complicating it.