Why Verification is Non-Negotiable
Filing an Income Tax Return (ITR) that doesn't match the data held by the tax department is one of the most common reasons for receiving a tax notice. In recent years, the Income Tax Department has strengthened its information-gathering network. Through
documents like the Annual Information Statement (AIS), it now has a comprehensive view of your financial transactions, often reported directly by banks, financial institutions, and your employer. Any mismatch between the income you declare and the data in your AIS or Form 26AS can trigger automated scrutiny, leading to delayed refunds, demand notices, and unnecessary stress. Taking the time to verify this data isn't just good practice; it's a critical step to ensure a smooth and compliant tax filing experience.
Your First Stop: The Annual Information Statement (AIS)
The Annual Information Statement (AIS) is your complete financial summary for the year in the eyes of the tax department. It goes beyond just tax deductions, capturing a wide array of transactions. This includes salary income, interest from savings accounts and fixed deposits, dividend payouts, rent received, and transactions in securities and mutual funds. Before you even begin filling out your ITR, your first task should be to download and review your AIS from the income tax e-filing portal. The AIS provides a detailed report of your financial activities, which helps in ensuring your ITR aligns with the information available to the department, thus promoting voluntary compliance and preventing non-compliance.
The Classic Cross-Check: Form 26AS
Think of Form 26AS as your tax passbook. It primarily contains details of Tax Deducted at Source (TDS) and Tax Collected at Source (TCS) linked to your PAN. It also lists any advance tax or self-assessment tax you have paid during the year. While the AIS provides a broader view of your transactions, Form 26AS is the definitive record for the tax credits you can claim. You must compare the TDS figures in your Form 16 (for salaried individuals) or Form 16A (for freelancers and professionals) with the entries in Form 26AS. If a tax credit appears in your Form 16 but not in your Form 26AS, you should immediately contact the deductor to get it rectified. Filing with mismatched TDS figures can lead to a lower refund or even a tax demand.
Reconciling Bank Statements and Other Income
Many taxpayers, especially those who are salaried, often overlook reporting interest earned from savings bank accounts or fixed deposits. The AIS, however, captures this information as it is reported by your bank. It is crucial to reconcile the interest income reported in your AIS with your bank statements or interest certificates and declare the correct amount in your ITR. The same rigour applies to other income sources like dividends from shares or mutual funds, and capital gains from investments. While the AIS will show gross sale values for securities, it may not have details like the cost of acquisition, which is needed to calculate the actual capital gain or loss. Always use your own records, like broker statements, as the primary source and use AIS for verification.
What to Do When You Find a Mismatch
Discovering a discrepancy in your AIS or Form 26AS is not a cause for panic, but it does require action. The income tax portal has a feature that allows you to submit feedback on transactions listed in your AIS. If you find an entry that is incorrect, duplicated, belongs to another person, or is otherwise wrong, you can flag it. You can select from options like 'Information is incorrect', 'Information is duplicated', or 'Information relates to another PAN/year'. This feedback helps the department correct its records over time. However, it is important to remember that you must report your actual, correct income in your ITR, regardless of what is shown in the AIS. If you have the documents to prove your correct income, you should file your return based on those and keep the proof ready in case of any future inquiry.
