In India, a recent case highlighted a significant issue with the Annual Information Statement (AIS): duplicate reporting of income. A tax professional discovered that a client’s AIS showed ₹4.1 lakh in interest income, while the actual amount was only ₹2.2 lakh. This was due to the same income being reported twice from different sources. Such an error could have led to the client overpaying taxes or facing penalties.
This incident strongly emphasizes the need for taxpayers to always cross-verify AIS data with original financial documents before filing their Income Tax Returns (ITR).
Here’s a breakdown of the problem and what you should do:
The Problem: Inaccurate AIS Data
The AIS is a comprehensive statement designed to provide taxpayers with a consolidated view of their financial transactions. However, it’s not always perfect. Common errors include:
- Duplication: The most frequent issue, as seen in the recent case, where the same income is reported multiple times from different sources (e.g., Post Office and another financial institution). This often stems from internal data routing or reporting system glitches.
- Mismatches in Capital Gains: AIS might show closing prices instead of actual transaction prices for stock sales.
- Real Estate Errors: For jointly owned properties, the full value might be attributed to each co-owner, regardless of their actual share.
- Fixed Deposit Interest Issues: Annual accrued interest might be shown again as the full maturity amount in the final year.
- Incorrect PAN Tagging: Transactions not related to the taxpayer might appear in their AIS.
- Outdated Information: Income or transactions from closed or dormant accounts might still be listed.
- Misclassification: For instance, gifts might be wrongly categorized as sale transactions.
- Discrepancies with Form 26AS: While AIS is more detailed, inconsistencies between AIS and Form 26AS can occur.
Why AIS Mismatches Matter: Consequences for Taxpayers
Filing your ITR based on incorrect AIS data can lead to serious repercussions:
- Increased Tax Liability: You might end up paying more tax than legally required.
- Notices from the Income Tax Department: The department is increasingly proactive in flagging mismatches between AIS and ITR.
- Delayed Refunds: Errors can significantly slow down the processing of your tax refunds.
- Tax Scrutiny: Persistent or significant mismatches could trigger a detailed tax audit.
- Penalties:
- Under-reporting income: Can lead to a 50% penalty under Section 270A of the Income Tax Act.
- Misreporting income: May result in a hefty 200% penalty under Section 270A.
- Penalties can be as high as ₹5 lakh, with daily fines of ₹10,000 to ₹15,000 for ongoing non-compliance.
How to Correct AIS Errors
The Income Tax Department provides a straightforward process to rectify inaccuracies in your AIS:
- Log In to the e-filing Portal: Access your account on the income-tax e-filing website using your PAN and password.
- Navigate to AIS: Under the ‘Services’ tab, select “Annual Information Statement (AIS)”.
- Review Transaction Details: Go to Part B of the AIS, which provides a detailed breakdown of your financial transactions.
- Submit Feedback: For any inconsistent entry, click on the ‘Optional’ tab (or “Add Feedback” button). From the dropdown menu, select the most appropriate feedback type (e.g., “Information is duplicated/included in other information,” “Information is not fully correct,” “Information relates to other PAN/year,” etc.).
- Confirm Submission: Submit your feedback.
- TIS Update: Once your feedback is accepted, the Taxpayer Information Summary (TIS) will automatically update.
- Keep Records: You will receive an acknowledgment for your submission. Always retain supporting documents (like bank statements, Form 16A, interest certificates) in case the Income Tax Department requests further clarification.
The Bottom Line: Verify, Don’t Blindly Trust
While the AIS is a valuable tool designed to enhance transparency and simplify tax filing, it is not foolproof. Consider it a helpful guide, not a definitive declaration. Your best defense against incorrect filings and potential tax troubles is thorough cross-verification of all high-value figures—especially interest income, stock sales, and dividend earnings—with your original financial documents. Proactive reconciliation and promptly reporting any discrepancies are key to accurate tax compliance.