An Annual Information Statement (AIS) is a statement containing a taxpayer’s financial information for a financial year. The Income Tax Department of India uses the AIS to check if the details provided in an Income Tax Return (ITR) match their records. If there’s a mismatch, it can trigger an automated scrutiny notice.
Top AIS Mismatches That Can Trigger an I-T Notice
Sujit Bangar, the founder of TaxBuddy.com, has highlighted some common errors that can lead to an income tax notice under Section 143(1)(a) of the Income Tax Act:
- Not Reporting Gross Interest and Dividends: Taxpayers often report the net amount of interest or dividends, after deducting Tax Deducted at Source (TDS). However, the AIS reflects the gross amount. The correct way to report is to declare the gross income and then claim the TDS separately.
- Missing Stock or Mutual Fund Sales: The AIS/SFT (Statement of Financial Transactions) trade lines provide the Income Tax Department with every detail of your stock or mutual fund sales. Not reporting the corresponding gains or losses, even from small trades or corporate actions, is a red flag.
- Ignoring TDS on Rent: If a tenant deducts TDS on the rent they pay you, you must report this income under the “Income from House Property” section of your ITR.
- Overlooking Interest on Tax Refunds: Any interest you receive on an income tax refund is a taxable income. This is often missed by taxpayers but is tracked by the AIS.
- GST Turnover vs. ITR Mismatch: For business taxpayers, especially those filing ITR-3 or ITR-4, a discrepancy between the turnover declared in their GST returns and their ITR filings can lead to scrutiny.
- Unexplained Cash Deposits: The source of any cash or time deposits reported in the AIS must be explained in your ITR. These deposits should be tied to income, loans, gifts, or maturity proceeds.
- Foreign Transactions: All foreign transactions, including credit card spending, are monitored. These transactions can trigger Tax Collected at Source (TCS) and may require asset disclosures.
- Not Reporting Property Sales: The sale of immovable property must be reported in your ITR, usually under Schedule CG (Capital Gains). If you cross certain thresholds, you may also need to declare the property as an asset.
- High-Income Earners Not Filing Schedule AL: High-income earners (with an income over ₹1 crore) must complete Schedule AL (Assets and Liabilities), which requires reporting the year-end value of homes, vehicles, and large deposits. An omission or incorrect value can lead to scrutiny.
Difference Between AIS and Form 26AS
The AIS is a more comprehensive statement than Form 26AS. While Form 26AS primarily focuses on TDS, TCS, and high-value transactions, the AIS includes a much broader range of financial data, such as savings account interest, dividend income, rent received, and off-market transactions.