As the Income-tax Department increasingly relies on automated data matching, AI-driven risk assessment, and system-based verification, taxpayers need to ensure that the information in their Income Tax Return (ITR) matches the records the Department already holds.
The Annual Information Statement (AIS) has become one of the most important tools for income tax scrutiny because it consolidates financial data from banks, brokers, registrars, GST systems, and other reporting entities into a single compliance view for the tax department.
However, an tax expert said, “Taxpayers should not treat the AIS as the sole basis for filing their ITR, as the information reflected therein may at times be incomplete, duplicated, or subject to reporting errors.”
“Instead, the details appearing in the AIS should be carefully reconciled with books of accounts, bank statements, Form 26AS, Form 16/16A, investment records, and other supporting financial documents before filing the return,” he said.
So if you find any discrepancy during reconciliation, you should examine it appropriately and disclose it in the ITR, with adequate documentation where required, to minimise the risk of scrutiny or notices from the Income-tax Department.
“Taxpayers often assume that partial disclosure is sufficient, but AIS-based data analytics now automatically flag inconsistencies between reported income, spending patterns, investments, and transaction reporting, increasing the chances of post-filing notices and scrutiny,” another tax expert said.
Some of the commonly observed mismatches that may lead to scrutiny or post-filing notices may include:
Salary income mismatch: Where salary income reported in the ITR differs from the salary disclosed in Form 16, TDS returns filed by the employer, or as reflected in AIS, the department may seek clarification on any underreported income.
Interest income not reported: Interest earned on savings bank accounts, fixed deposits (FDs), Recurring deposits (RDs), income tax refunds, etc., often appears in AIS based on banks’ and financial institutions’ reporting. “Non-disclosure or partial disclosure of such income in the ITR may result in a mismatch notice,” he said.
TDS/TCS mismatch: Claiming excess Tax Deducted at Source (TDS) or Tax Collected at Source (TCS) credit that does not reconcile with Form 26AS or AIS may lead to adjustment of refund claims or issuance of a notice seeking justification.
High-value financial transactions not disclosed: Transactions such as large mutual fund investments, purchase or sale of immovable property, substantial credit card payments, foreign remittances, or securities transactions reflected in AIS but not aligned with declared sources of income may attract scrutiny.
Capital gains mismatch: Sale of shares, mutual funds, property, or other capital assets may be reported in AIS by intermediaries. However, incorrect computation or omission of capital gains in the ITR could trigger an inquiry.
