Filing your Income Tax Return (ITR) can be tricky, especially if you have a joint bank account. A common point of confusion arises with fixed deposits (FDs), where the entire investment amount can show up in the Annual Information Statement (AIS) of both joint account holders. This can lead to a mismatch that may trigger a tax notice from the Income Tax Department.
Here’s a breakdown of why this happens and how to protect yourself:
The Core Problem: Duplicate Reporting
The issue stems from Rule 114E(2) of the Income-tax Rules. This rule requires banks to report specified financial transactions (SFTs) to the Income Tax Department. In the case of joint accounts, the entire transaction value is attributed to every single joint holder’s PAN. This means if one person invests Rs. 10 lakh in an FD, both account holders’ AIS will show a Rs. 10 lakh deposit. Even if you submit feedback to the bank to correct this, it may be rejected as this is a standard practice under the rule.
The Solution: Accurate Reporting in Your ITR
To avoid getting a tax notice under sections like 148A or 133(6), the key is to ensure your ITR accurately reflects the true ownership of the funds.
- Declare Income Correctly: Only the individual who actually contributed the funds for the FD should declare the interest income from that FD in their ITR. The other joint holder should not report this income. This is the most critical step to avoid a mismatch.
- Maintain Supporting Documents: Keep clear and organized records of the source of the funds. This includes bank statements showing the withdrawal used to create the FD, as well as any other investment proofs. These documents will be essential if the Income Tax Department initiates a reassessment proceeding (Section 148A) or requests information (Section 133(6)).
- Use the AIS Feedback System: While the bank may reject your request for a change, it’s still good practice to use the AIS feedback feature. You can select options like “Information relates to other PAN” or “Information is duplicated.” This action creates a digital trail that shows you were proactive in identifying and flagging the discrepancy.
By taking these steps, you can confidently navigate the complexities of joint accounts and ensure your ITR filing is accurate, avoiding unnecessary scrutiny from tax authorities.