The Annual Information Statement (AIS) has transformed the way taxpayers prepare their income tax returns. With details of salary, bank interest, dividends, securities transactions, tax deducted at source and other financial information available at one place, filing a return has become significantly easier.
As the scope of information in the AIS continues to expand, many taxpayers have started treating it as the definitive record of their taxable income. That, however, is where the biggest misconception lies.
While the AIS enables taxpayers to verify information reported by various entities, it is an information statement, not a tax computation or a complete financial statement. Relying on it without reviewing one’s own financial records can result in inaccurate reporting and potential tax consequences.
Not every source of income appears in AIS
Several categories of taxable income may not appear because no TDS is deducted or deductible.
For instance, rental income earned from a deemed let-out house property will not be reflected in the AIS. Likewise, taxable gifts received from non-relatives, or interest income earned on an NRE account may be absent. Again, freelancers and small business owners should not assume that the receipts appearing in the AIS represent their entire taxable income. Their income must be reported based on their sales books.
AIS does not compute capital gains
One of the most common mistakes taxpayers make is assuming that the figures relating to securities transactions in the AIS represent their taxable capital gains.
In reality, the AIS reflects transaction details such as date of purchase, date of sale, sale consideration and cost of acquisition. The actual capital gain or loss must be computed after considering the expenditure incurred wholly and exclusively for transfer, applicable tax rates, and carried-forward losses. Taxpayers should therefore rely on their broker statements and capital gains reports while preparing their return instead of depending solely on the AIS.
Deductions need independent verification
Whether a taxpayer is eligible to claim deductions depends on the applicable legal provisions and the supporting documentation. Housing loan interest, deductions relating to specified investments and several other claims continue to require independent verification.
Records matter
Documents such as salary certificates, bank statements, capital gains reports, rental records, housing loan certificates and details of exempt income continue to play a crucial role in ensuring accurate tax compliance. These also help in responding to any future queries from the tax authorities. Before filing the return, taxpayers should reconcile the AIS with Form 26AS, Form 16 and other financial records. The AIS feedback facility may be used to report discrepancies.
The writer is senior partner, Nangia & Company. Inputs from Neetu Brahma
Disclaimer: The views expressed are the author’s own and do not reflect the official policy or position of Financial Express.