Filing an Income Tax Return (ITR) is not merely an obligation but a matter of good record keeping of all the financial transactions of a tax payer as it reflects his financial health. In the present tax administration system, the Income Tax Department has access to information about a taxpayer's financial transactions from multiple reporting sources. The Annual Information Statement (AIS) provides the taxpayer with a consolidated view of much of this information before the return is filed. The Income Tax Department itself advises taxpayers to download and examine the AIS and Form 26AS and reconcile the information with their records before filing the return
1. What is AIS?
The Annual Information Statement is a comprehensive statement of information available with the Income Tax Department relating to a taxpayer. Its objective is to display information before filing the return, facilitate taxpayer feedback, promote voluntary compliance and enable pre-filling of the return. Section 285BA of the Income Tax Act, 1961 (Section 508 of Income Tax Act 2025) requires specified entities to file a Statement of Financial Transaction (SFT) to report high-value financial transactions to the Income Tax Department. Under this section, banks, mutual fund houses, stock exchanges, and property registrars are required to report certain specified high-value transactions like cash deposits, credit card payments, shares/mutual fund trading, and real estate transactions to the Income Tax Department.
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Section 203AA & Section 206C of the Income Tax Act, 1961 (Section 397 of the Income Tax Act 2025) enables tracking of TDS (Tax Deducted at Source) and TCS (Tax Collected at Source) submitted by employers, banks, or buyers, which are fundamentally integrated into the AIS framework. Similarly Sections 90 & 90A of the Income Tax Act, 1961,(Section 159 and 160 of Income Tax Act 2025) provides for sharing information by the foreign tax authorities under bilateral tax treaties or agreements. Any transaction involving wealth creation via securities is tracked directly through market intermediaries such as stock exchanges, brokers, Depositories, Mutual Funds, companies issuing shares and debentures. Non-Banking Financial Companies (NBFCs) report large credit card transactions and high-value loan repayments. Sub-Registrars (Property Registrars), Regional Transport Offices (RTO / Motor Vehicle Authorities, etc), report details of registrations made with them with financial details.
Section 285BB of the Income Tax Act, 1961 (Section 510 of the Income Tax Act 2025) read with Rule 114-I of the Income Tax Rules, 1962 mandates the Principal Director General of Income-tax (Systems) or Director General of Income-tax (Systems) to upload a comprehensive financial profile of the taxpayer to their registered account in the form of Annual Information Statement (AIS). It is the duty of every Assessing Officer to make use of the information made available in AIS at every stage of assessment. At present Central Processing Centre (CPC), Bengaluru, makes first level comparison of data provided in the Income Tax Return with AIS at the time of processing under section 143(1) of the Income Tax Act, 1961. Any significant variation found is notified to the tax payers at the time of initial processing only and taxpayer is given an opportunity to explain and reconcile the difference. Only non reconciled cases are taken to the next level of verification and selected for detailed verification through scrutiny assessment under section 143(3) of the Income Tax Act, 1961.
In this process Assessing Officers coordinates with various authorities providing information for AIS to verify the correctness of information provided bases on the inputs or information gathered from the tax payers. Income Tax Department also constantly updates the source and list of agencies providing AIS information depending on the needs of the Income Tax Department.
Income Tax Department also uploads a Taxpayer Information Summary (TIS) which provides an summarized view of information by category. Department also gives an opportunity to the tax payer to confirm the correctness of information available with them in the form of feedback and to accept or reject the information. Wherever, tax payer does not agree with the information made available on TIS, Income Tax Department again takes up the matter with the agency making available such information with a request to verify and reconfirm the correctness of information.
There are multiple instances coming up every year where a taxpayer is issued with a notice to explain the source of income when in fact the information does not pertain to the tax payer at all but uploaded in his account due to certain errors such as wrong PAN, wrong date, duplicate entries, etc. uploaded by the agencies providing information. To avoid such a scenario it is advisable to the tax payer to verify the correctness of information available in AIS and provide correct feedback well in time.
2. Benefits of checking AIS before filing ITR
Some of the important benefits of verifying the AIS information at the time of filing ITR are discussed below.
a. It helps identify income such as savings bank interest, dividends, capital gains, income from other sources, etc. that the taxpayer may have overlooked.
b. AIS information can draw attention to certain high value transactions reported by banks, financial institutions, etc. such as purchase or sale of immovable properties, foreign remittances, significant cash deposits, etc.
c. One of the most common problems while filing an ITR is mismatch in TDS/TCS. A taxpayer may have Form 16 from an employer, Form 16A from banks which may not tally with the TDS information available in form 26AS. A mismatch discovered before filing can often be resolved much more easily than a mismatch discovered after the return is processed.
d. AIS information may sometimes contain errors, duplication or transactions that does not pertain to the taxpayer. For example: A bank may report interest of ₹1,50,000 whereas the taxpayer's records show ₹1,10,000. Instead of simply accepting either figure, the taxpayer should examine the underlying bank statement and interest certificate and determine the correct amount. As stated earlier in this Article, AIS provides a facility for the taxpayer to submit feedback on reported information. The statement can show the reported value as well as the modified or accepted value after feedback or source confirmation. Thus, AIS should be treated as a tool to verify the correct transactions
e. One of the important benefits of checking AIS is that it enables the taxpayer to identify differences between Information available with the Income Tax Department and Information being reported in the ITR there by avoiding possibility of getting a tax notice. Checking AIS before filing gives the taxpayer an opportunity to investigate and document the transaction in advance.
f. Capital-gains reporting are an area where taxpayers frequently face difficulties. A taxpayer may have transactions involving shares, mutual funds, bonds, other securities or sale of immovable property. The taxpayer should not simply copy the AIS figure into the capital-gains schedule. The AIS transaction should be reconciled with the broker's statement, contract notes, mutual-fund statement and other relevant records. The sale value of a property appearing in AIS is not necessarily the taxable capital gain. Capital gain generally requires determination of the relevant sale consideration, cost and other applicable index adjustments according to the tax provisions.
g. AIS contain information relating to payment of taxes, including advance tax and self-assessment tax. Before filing the return, the taxpayer should verify the correctness of tax already paid reported in the income tax portal in comparison to copy of tax paid challans in his hand.
3. Conclusion:
The Annual Information Statement (AIS) has significantly enhanced transparency in the income-tax compliance process by providing taxpayers with a consolidated view of financial information reported to the Income Tax Department by various reporting entities. It has also strengthened the ability of the tax administration to identify transactions requiring clarification or reconciliation. For the taxpayer, AIS should form an important part of the pre-filing process. Before submitting the Income Tax Return, the taxpayer should download the AIS and Taxpayer Information Summary (TIS), examine the information carefully and reconcile it with relevant records in his possession. Maintaining documentary evidence of the reconciliation and feedback can be useful if the transaction is subsequently questioned by the Income Tax Department. Thus AIS is a welcome initiative by the Income Tax Department promoting voluntary compliance with minimum interference by government authorities.
(Author: Venugopal Bhandary is a Senior Audit Officer in C&AG of India (Retd) and a senior tax consultant at Venu’s Income Tax Services, Andheri east, Mumbai. He can be contacted at venusincometaxservices@gmail.com)
