In 2021, the income tax department launched the Annual Information Statement (AIS). The AIS is a comprehensive statement containing details of all the financial transactions undertaken by you in a financial year (FY). It contains the information that are mandated under the Income-tax Act, 1961.
Individual taxpayers must ensure that the income details in their income tax return (ITR) form matches with that in the AIS. If there is a mismatch, then the income tax department may send you an income tax notice.
Let us say, while filing income tax return this year, you forgot to download and check the information in your AIS. Suppose there is an error in the AIS which has not been rectified by you, say interest earned from a bank account which was closed two years ago. Since the bank account has already been closed, you will not be earning interest. However, your AIS states that you have earned interest from that bank account during the FY, and it has been not disclosed by you in your ITR form. The tax department will send you an income tax notice with additional tax demand.
What are the repercussions of such errors, does the taxpayer have to pay a penalty for not checking AIS before filing ITR? ET Wealth spoke with experts and here’s what they have to say when there is such a mismatch in one’s ITR and AIS.
Shashi Mathews, Partner, Induslaw: As per the income tax department, it is the taxpayers’ responsibility to ensure that information in the AIS is accurate and any modifications should be intimated to the tax department. While there is no penalty prescribed under the law for not reporting errors in AIS, the taxpayer should ensure that, irrespective of whether errors have been reported to the Department, the return filing should be complete with all accurate and correct details. If there is a mismatch i.e., say AIS shows particular income but same has not been declared in ITR, then the income tax department may ask to explain the same. If returns are filed with true and correct information, then the taxpayer need not worry.
S Vasudevan, Executive Partner Lakshmikumaran & Sridharan Attorneys: The taxpayers would not be subject to any penalty for not getting the errors corrected in AIS before the filing of tax return. However, these errors may invite adjustment notice from Centralized Processing Centre while the return is under process or queries from the Assessing Officer during assessment/reassessment proceedings. Therefore, it is advisable that the taxpayers view AIS and raise the feedback for timely correction. It may further be noted that if there is a variation between the TDS/TCS/tax payment details as displayed in Form26AS on TRACES portal and the TDS/TCS/ tax payment details as displayed in AIS on Compliance Portal, the taxpayers can rely on the information displayed on TRACES portal for the purpose of filing of tax return and other tax compliance.
Mitesh Jain, Partner, Economic Laws Practice: The taxpayer should not be subject to any penalty for failure to submit the feedback before filing his return of income. However, in case of discrepancy between information reflected in AIS and return submitted by the taxpayer, the tax authorities may issue a notice to the taxpayer to scrutinize such transaction/ discrepancy in greater detail.
What is Annual Information Statement (AIS)?
AIS was launched by the income tax department in November 2021. It is basically an extension of the Form 26AS which was earlier being issued. While Form 26AS will continue for now, AIS has more detailed information and information from more sources.
The AIS shows certain information pertaining to the taxpayer (such as interest income, dividend income, securities transactions, mutual fund transactions, foreign remittance information, etc.).
At the time of launch of AIS, the income tax department provided a facility to the taxpayer to submit feedback if the taxpayer feels that the information is incorrect.
This furnishing of feedback is only an option provided to the taxpayer to rectify/correct any discrepancy in information and no obligation has been casted on the taxpayer to mandatorily submit the feedback/ rectify the discrepancy before filing of return. Additionally, the provisions of the IT Act or the IT Rules also do not prescribe any penalty for failure to submit such feedback.
In any case, to be on the safer side, if there is any discrepancy, the taxpayer should always inform the tax department by using the online functionality. There is no time limit prescribed for intimation of discrepancies either.