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If this document is packed with errors, you may receive an income tax notice

The Annual Information Statement was introduced by the Income Tax Department in 2021. (AIS). The AIS is a detailed statement that contains information about all of your financial transactions within a fiscal year (FY). It comprises the information required by the Income-tax Act of 1961.

Individual taxpayers must ensure that the income information on their income tax return (ITR) form corresponds to the information on the AIS. If there is a discrepancy, the income tax department may send you a tax notice.

Individual taxpayers must ensure that the income information on their income tax return (ITR) form corresponds to the information on the AIS. If there is a discrepancy, the income tax department may send you a tax notice.

Assume you neglected to download and verify the information in your AIS while completing your income tax return this year. Assume there is an inaccuracy in the AIS that you have not corrected, such as interest received from a bank account that was closed two years ago. You will not earn interest because the bank account has already been closed. However, your AIS shows that you received income from that bank account throughout the fiscal year, which you did not mention in your ITR form. The tax agency will issue you an income tax notice with a demand for extra tax.

What are the ramifications of such mistakes, does the taxpayer have to pay a penalty for not verifying AIS before filing ITR? ET Wealth chatted with experts, and here’s what they had to say about the disparity between one’s ITR and AIS.

Shashi Mathews, Induslaw Partner: According to the income tax department, the taxpayer must verify that the information in the AIS is correct, and any changes should be reported to the tax department. While there is no penalty for failing to submit mistakes in AIS, the taxpayer should ensure that the return filing is complete with all exact and correct facts, regardless of whether errors have been notified to the Department. If there is a discrepancy, for example, AIS displays a certain income but it is not disclosed in the ITR, the income tax department may request an explanation. The taxpayer does not need to be concerned if returns are filed with genuine and proper information.

Executive Partner S Vasudevan of Lakshmikumaran & Sridharan Attorneys: Taxpayers would not be penalized for failing to repair inaccuracies in AIS prior to completing their tax returns. These inaccuracies, however, may result in an adjustment notification from the Centralized Processing Centre while the return is being processed, or inquiries from the Assessing Officer throughout the assessment/reassessment process. As a result, it is recommended that taxpayers study AIS and provide input for quick repair. It should also be noted that if the TDS/TCS/tax payment details displayed in Form 26AS on the TRACES portal differ from the TDS/TCS/tax payment details displayed in AIS on Compliance Portal, taxpayers can rely on the information displayed on the TRACES portal for the purpose of filing tax returns and other tax compliance.

Mitesh Jain, Economic Laws Practice Partner: The taxpayer should not be penalized for failing to offer comments before submitting his income tax return. However, if there is a disagreement between the information reflected in AIS and the return submitted by the taxpayer, the tax authorities may send a notification to the taxpayer to further investigate such transaction/discrepancy.

What exactly is an Annual Information Statement (AIS)?

The income tax agency will introduce AIS in November 2021. It is essentially an expansion of the Form 26AS that was previously released. While Form 26AS will continue to be used for the time being, AIS has more extensive information and data from more sources.

The AIS reveals specific information relevant to the taxpayer (such as interest income, dividend income, securities transactions, mutual fund transactions, overseas remittance information, etc). (such as interest income, dividend income, securities transactions, mutual fund transactions, foreign remittance information, etc.).

When AIS was first introduced, the income tax authorities allowed taxpayers to make comments if they believed the information was erroneous.

This feedback provision is merely an option offered to the taxpayer to rectify/correct any inconsistency in information, and no responsibility has been placed on the taxpayer to submit the feedback/correct the discrepancy before submitting the return. Furthermore, neither the IT Act nor the IT Rules provide any penalties for failing to provide such input.

To be safe, if there is any discrepancy, the taxpayer should always notify the tax department via the online feature. There is no time restriction for reporting inconsistencies, though.

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