Taxpayers should be careful while reporting certain incomes, such as interest income, dividend income, and other similar receipts that are often credited to their bank account after deduction of tax at source (TDS).
With the ongoing Income Tax Return (ITR) filing season for FY26, taxpayers should avoid preparing their returns solely on the basis of figures reflected in the Annual Information Statement (AIS) or their Form 26AS.
The Income Tax Department has admitted leveraging data analytics, artificial intelligence, and information received from multiple reporting entities to identify discrepancies, omissions, and potential instances of under-reporting of income, the Chairman of the Central Board of Direct Taxes (CBDT) said in an interview to The Indian Express. Further, the scope of information captured under the AIS has expanded significantly in recent years, making it an important but not exhaustive compliance tool.
Some of the key transactions that taxpayers should carefully review and reconcile before filing their returns for AY 26-27 are discussed below.
1. Savings Account Interest – Taxpayers should verify that the interest credited to their savings bank accounts during the financial year matches the amount reflected in AIS. Individuals often maintain multiple bank accounts and may inadvertently omit small interest credits while preparing their returns. Any mismatch could result in under-reporting of income.
2. Fixed Deposit Interest – Fixed deposit interest is one of the most common areas where discrepancies arise. AIS may reflect interest on an accrual basis, whereas taxpayers often consider only the interest actually credited or received during the year.
“Therefore, the interest reflected in AIS should be compared with bank interest certificates and account statements to ensure that the correct taxable amount is reported. An alternative to this is to request from the respective bank for the interest certificate,” said CA (Dr.) Suresh Surana.
3. Reporting Gross Income and Not Net Receipts – Taxpayers should be careful while reporting certain incomes, such as interest income, dividend income, and other similar receipts that are often credited to their bank account after deduction of tax at source (TDS).
In such cases, the amount reflected in the bank statement represents the net amount received and not the actual taxable income. The income required to be disclosed in the ITR is the gross amount before deduction of TDS, with the TDS claimed separately as a tax credit.
Therefore, taxpayers should reconcile their bank statements with the AIS and Form 26AS before filing the return. Reliance solely on bank credits may result in reporting only the net receipt, leading to under-reporting of income and potentially triggering notices or inquiries from the Income Tax Department.
4. Dividend Income – Dividend income received from shares, mutual funds, and other investments should be cross-verified with AIS and bank records.
Since dividend information is reported by companies and intermediaries to the tax authorities, omissions are easily identifiable during assessment. Taxpayers should ensure that even small dividend receipts are appropriately disclosed in the ITR.
5. High-Value Cash Deposits – Large cash deposits reported under the Statement of Financial Transactions (SFT) framework generally appear in AIS and should be reconciled with bank statements.
“Taxpayers should ensure that such deposits are supported by adequate documentation regarding the source of funds, as significant unexplained cash deposits may attract scrutiny from the tax authorities,” stated CA (Dr.) Suresh Surana.
6. Share and Mutual Fund Transactions – AIS may contain details of transactions involving shares, securities, bonds, and mutual funds reported by brokers, depositories, and registrars.
These entries should be matched with contract notes, capital gains statements, and bank records. Taxpayers should not rely solely on AIS for capital gains computation, as the statement may not capture all details necessary for determining taxable gains or losses.
7. Business and Professional Receipts – For business owners and professionals, AIS may contain information relating to receipts reported through TDS returns, merchant payment platforms, financial institutions, or other third-party reporting mechanisms.
These figures should be reconciled with books of account and bank statements to ensure that turnover, gross receipts, and taxable income disclosed in the return are complete and accurate.
8. Purchase and Sale of Immovable Property – AIS may contain information regarding the purchase or sale of immovable property reported by registrars and other authorities.
Taxpayers should reconcile these transactions with bank records and property documents to ensure that any capital gains, TDS implications, or disclosure requirements have been properly addressed in the return.
9. Maturity Proceeds of Insurance Policies – Insurance maturity proceeds may be credited to bank accounts and, in certain cases, may also be reported in AIS. Taxpayers should verify whether the proceeds qualify for exemption under the applicable provisions and maintain supporting documentation to substantiate the claim.
10. Foreign Income Credits – Individuals receiving salary, professional fees, dividends, interest, or other income from overseas sources should reconcile foreign remittances appearing in their bank accounts with AIS disclosures and ensure that all foreign income is appropriately reported in the return.
Taxpayers claiming foreign tax credit should additionally verify the availability of supporting documentation.