Planning Taxes In An Age Of No-Refund Notices, AIS Data Matching

For many taxpayers, filing an income tax return (ITR) was once largely a self-declared exercise. That era is now firmly behind us. With the Income Tax Department’s increasing reliance on the annual information statement (AIS), statement of financial transactions (SFT), and technology-led data matching, tax planning today has become as much about accuracy and reconciliation as it is about saving tax.

One visible outcome of this shift is the growing number of ‘no-refund’ or ‘refund adjusted’ intimations. These intimations are not penalties, nor do they automatically imply wrongdoing. Instead, they signal a deeper shift in tax administration from trust-based self-reporting to data-driven validation.

Says Niyati Shah, vertical head - personal tax at 1 Finance, a personal finance firm: “A ‘no-refund’ or ‘refund adjusted’ intimation typically means that while tax has been deducted or paid, the Income Tax Department’s system does not find the refund claim to be justified after adjusting for mismatches, under-reported income, interest liabilities, or past demands. In many cases, refunds are withheld because the return does not align with information already available to the department through AIS and other reporting frameworks.”

AIS has fundamentally altered the compliance landscape by acting as a 360-degree financial mirror, capturing salary, bank interest, dividends, mutual fund redemptions, share transactions, property deals, and even foreign remittances. This information is algorithmically matched with the tax return, making underreporting increasingly difficult. Any inconsistency in amount, nature, or timing is automatically flagged and can result in refund denial, adjustment, or scrutiny.

An error that most taxpayers make is that they think that tax deducted at source (TDS) is equivalent to tax compliance. TDS, however, is only a form of credit that you get. 

Other typical mistakes are people completely overlooking AIS, not reporting capital gains correctly (the common one is where the brokers show the gross value), not reporting income from other sources like interest from savings or dividends, and claiming deductions/ exemptions without supporting documents or matching the eligibility criteria. Even small mismatches of a few thousand rupees can trigger a ‘no-refund’ outcome.

Adds Shah: “In this environment, tax planning must begin well before the filing season and evolve into a year-round reconciliation process. Taxpayers should periodically review AIS, submit feedback for incorrect entries, and ensure consistency across Form 16, Form 26AS, AIS, and personal records. Capital gains must be computed transaction-wise, factoring in the holding period, exemptions, and set-offs accurately. Importantly, any pending demand, however old or disputed, should be tracked and addressed proactively.”

The broader message is unmistakable: modern tax planning is no longer about aggressive optimisation, but about clean reporting, timely reconciliation, and informed compliance. As data matching tightens and refunds become more conditional, friction-free taxation will belong to those who treat accuracy as the first step in tax saving, not the last.