Income tax filing: How to deal with inaccuracies in annual information statement

Introduced in 2021, the AIS gives a snapshot of financial transactions—ranging from securities and mutual funds to property deals and fixed deposits—during a fiscal year, sourced from multiple reporting entities such as banks, registrars, depositories, and sub-registrars.

Available on the Income Tax e-Filing portal, the AIS complements the form 26AS by providing an expanded view of various income streams and transactions that might attract tax implications.

However, it is often riddled with inaccuracies that leave taxpayers vulnerable to notices and assessments.

The problems

One of the most frequent errors in the AIS concerns capital market transactions, especially equity trading. Brokers and depositories report trade details, but inconsistencies between actual trade values and reported prices often don’t match.

“We’ve come across several critical mismatches in tax reporting that can create significant challenges for taxpayers. In equity transactions, for instance, depositories often report closing prices that differ slightly from the actual transaction prices,” said Ashish Karundia, chartered accountant and founder, Ashish Karundia & Co.

These discrepancies often arise from systems failing to capture real-time prices or settlement-specific data.

“I received cases of senior citizens who do not even have a demat account. Surprisingly, capital gains were reported in their AIS. These individuals have never transacted in any securities in their entire lives, yet the system showed transactions,” said lawyer and chartered accountant Kinjal Bhuta, who is also a treasurer at the Bombay Chartered Accountants’ Society.

Property deals are another area where AIS creates major confusion, especially in cases of joint ownership. The system often attributes the entire property value to each co-owner, causing inflated income disclosures.

“One of the reasons is that immovable property, time deposits, securities, or mutual fund units were purchased in joint names merely for the sake of convenience or as a gesture of affection. However, the second (joint) holder did not make any financial contribution toward the purchase,” said Pankaj Bhuta, chartered accountant and founder of P. R. Bhuta & Co.

The reporting systems often double-count the property value, creating a mismatch that doesn’t reflect the actual financial arrangement.

Even gift transactions get misinterpreted. “A peculiar case involving property gifting. When someone does a gift deed and registers it under stamp duty, the system incorrectly treats it as a registered purchase and sale. This means both the gifting and receiving parties start getting notices about stamp duty value and fair market value, even though it was just a gift,” said Kinjal Bhuta.

The issue lies with how sub-registrars report transactions, noted Ganesh Rajgopalan, partner at accounting services provider A.P. Rajagopalan & Co.

“When joint property transactions are registered, sub-registrars report the same transaction for each joint holder, creating a complex reporting scenario. This means a single property transaction gets recorded multiple times across different PAN (permanent account number) holders, without clarity on individual ownership shares,” he said.

The AIS often miscalculates even interest income from fixed deposits. This issue arises when a taxpayer opts to receive interest only upon maturity while still being liable to pay tax on the interest accrued each year under the accrual method. In such cases, the AIS often either misses out on the yearly accrual or overstates the income in the year of maturity.

For instance, if a taxpayer invests ₹5 lakh in a five-year fixed deposit at an annual interest rate of 7%, interest of around ₹35,000 accrues each year, totalling ₹1.75 lakh over five years. Ideally, this interest should be reported annually and taxed accordingly. However, if the bank reports the full maturity value of ₹6.75 lakh (principal + interest) only in the final year, the AIS reflects the entire ₹1.75 lakh interest as income in one year, inflating that year’s income.

What can taxpayers do?

If you’ve noticed inaccuracies in your AIS, the first step is reconciliation—comparing the AIS, Form 26AS, and Taxpayer Information Summary (TIS) with your own records.

“Always reconcile your income with Form 26AS, AIS, and TIS. If any discrepancies are found, you can submit your disagreement through the AIS portal on the Income Tax Department website. Ensure you retain all supporting documents to substantiate your response,” said Pankaj Bhuta.

He shares a step-by-step guide:

Log in to https://www.incometax.gov.in

Go to Pending Actions → Compliance Portal

Click “Proceed” and select the AIS tile

Choose the financial year → View AIS → Select the transaction

Click ‘Optional’ under ‘Provide Feedback’ and submit your response.

Keep the acknowledgement (Reference ID) for future reference.

Karundia suggested that taxpayers should identify the type of mismatch, prepare a reconciliation, and then raise it through the AIS platform. “If the issue remains unresolved through the AIS feedback mechanism, taxpayers may also consider directly writing to the reporting entities for correction.”

What should the tax department do?

Annual information statements lack legal backing. “Taxpayers can challenge these AIS entries because there’s no law validating these reports. The department has created these things without a proper legislative basis,” said Kinjal Bhuta.

She also recommended that the government issue public circulars whenever there are errors or delays.

“There should be an option for taxpayers to specify the reason for including a second/joint name and also upload supporting documentary evidence,” added Pankaj Bhuta.

Karundia recommended expanding feedback options on the AIS platform. “Introducing a mechanism for taxpayers to directly communicate feedback to reporting entities would enhance accountability and potentially lead to faster resolution times.”

“The current process of sending queries to sub-registrars is fundamentally flawed and creates unnecessary complications for taxpayers. The Income Tax Department should develop sophisticated software logic to automatically match transaction values,” highlighted Rajgopalan.

The income tax department didn’t respond to Mint‘s emailed queries.