The Potential Pitfalls of the Annual Information Statement (AIS) for Income Tax Returns: Around 6.77 crore income tax returns (ITRs) were filed for FY23 by the end of the deadline — July 31. However, experts say taxpayers cannot feel relieved completely as there are chances that some may receive a notice/intimation soon, owing to the dynamic Annual Information Statement (AIS). Tax experts say that tackling the AIS form is difficult both while filing the returns and after the returns have been filed.
The AIS was introduced along with the e-verification scheme in March 2023 and has been used by many for filing ITR. Now, even filing returns, taxpayers can get notices asking for clarifications on reports the Al tool gathers. So, if taxpayers have filed their return by July 31, they need to match the AlS again. If the other party’s AIS mismatches and they get a revision request, they must also rectify returns,” said Avinash Shekhar, CEO and Founder at TaxNodes, a crypto account and taxation enterprise.
What is AIS and why this issue?
AIS or Annual Information Statement is displayed in Form 26S and covers all information related to the tax deducted at source (TDS) and tax credited at source (TCS) for an individual. The income tax department has mentioned in the past that AIS is a “useful” document that can help taxpayers but is not mandatory to be used for filing returns.
“This does lead to an understanding that there need not be 100 percent accuracy to what AIS calls out (and can miss on some data). The reasons for missing data are many, like the fact that businesses/banks have deducted TDS but haven’t paid yet might lead to TDS entries in AIS getting delayed. Also, there could be scenarios where asset management companies (AMCs) might have delayed sharing dividend information on mutual funds etc,” Raghuram Trikutam, CEO at Descrypt, a tax filing platform told, CNBC-TV18.
Trikutam believes that AIS tends to change and should offer a guiding direction and not be used as an absolute statement for tax filing.
How can taxpayers deal with updated information in AIS?
AIS is a dynamic form that may jumble up the data and mention unidentified or long-forgotten information. Therefore, verifying AIS accuracy is crucial before filing the ITR.
One taxpayer says some interest income is reflected in her bank account that has been closed for the past 10 years. This interest income is reflected in her AIS statement after filing tax returns.
To prevent unnecessary actions or income tax notices, one must file a revised income tax return with updated and correct information (if any). This year, tax there are chances of lots of revisions in filing returns as per the data given by the clients. The tax officer may send a notice to clarify the data taxpayers have reported under the Income Tax return,” Shekhar said.
Response to e-verification scheme
The system under the e-verification scheme gathers information and checks its accuracy. If there is any mismatch or discrepancy in the field returns, it sends notices to the taxpayers. Last year, around 66,000 taxpayers got e-verification notices. So, if taxpayers receive any notice, they should respond and correct it within the specified time frame.
The taxpayers should view AIS and raise the feedback for timely correction. It may further be noted that if there is a variation between the TDS/TCS/tax payment details as displayed in Form26AS on TRACES portal and the TDS/TCS/ tax payment details as displayed in AIS on compliance portal, the taxpayers can rely on the information displayed on TRACES portal for filing of tax return and other tax compliance,” Shekhar told CNBC-TV18.com.
This furnishing of feedback is only an option provided to the taxpayer to rectify/correct any discrepancy in information and no obligation has been cast on the taxpayer to mandatorily submit the feedback/rectify the discrepancy before filing of return.
Additionally, the provisions of the Income Tax Act also do not prescribe any penalty for failure to submit such feedback. In any case, to be on the safer side, if there is any discrepancy, the taxpayer should always inform the tax department.