With tax filing season underway, one of the most common, and increasingly risky, mistakes taxpayers make is not aligning their Income Tax Return (ITR) with the Annual Information Statement (AIS). It’s not always about fraud. In many cases, it’s just a mismatch. But the consequences can still sting.
What is AIS?
It is essentially a consolidated record of your financial transactions, compiled by the tax department using data from banks, employers, mutual funds, and other sources. If your ITR does not match what the department already knows about your finances, it could result in a notice, even if the error was unintentional.
This year, scrutiny is tighter than ever, especially after the income tax department found over 90,000 salaried individuals had claimed false deductions, leading to a tax loss of more than Rs 1,070 crore. That discovery has set the tone for a tighter approach to verification.
What Is Getting Flagged?
According to CA Aastha Gupta, Partner at S.K. Gulati and Associates, mismatches are often avoidable. These are some of the typical problem areas:
Missed interest income: People often forget to include interest earned on savings accounts or fixed deposits, especially if the bank has already deducted TDS. But that income still has to be reported.
TDS mismatches: If the tax deducted at source that you claim in your return does not match with what is in Form 26AS or AIS, it will raise a red flag.
Capital gains: Selling shares or mutual funds and not reporting the gains, or misreporting them, is common, especially when transactions are made through different platforms.
High-value purchases or investments: Buying property, investing large sums in mutual funds or bonds, or any such transaction that appears in the AIS but isn’t reflected in your return can cause problems.
What Can You Do?
There is no shortcut here, it comes down to a bit of legwork. Gupta suggests a few basics that can help you avoid hassle later:
Compare your AIS and Form 26AS with your ITR draft before filing. If something doesn’t match, fix it.
Report all sources of income, even if tax has already been deducted. TDS does not replace the need to declare the income.
Keep your documents organised, this typically includes bank statements, rent receipts, lease agreements, investment records, loan sanction letters, etc. You might not need to upload them, but you should have them ready in case of questions.
The New ITR Rules Are Stricter
The Central Board of Direct Taxes has released new ITR forms for the financial year 2025-26 with some minor yet significant changes.
Starting this year, ITR-1 and ITR-4 require specific proof for deductions. For example, if you are claiming benefits under Section 80C, like LIC premiums or PPF investments, you will need to provide policy numbers or document IDs. Claims under Section 80D for health insurance must include the insurer’s name and policy number.
If you are claiming home loan benefits under Sections 80E or 80EEA, or a deduction for an electric vehicle under Section 80EEB, expect to provide details like loan account numbers and vehicle registration numbers.
Even HRA claims are being checked more closely. In case your rent goes above Rs 1 lakh annually, your landlord’s PAN is needed, and your lease agreement should be in order. A casual approach here could lead to the claim being rejected outright.
Why Does It Matters?
Every detail you enter is now being run against the department’s own data. The AIS allows near-instant comparison of what you claim and what has been reported by third parties. It is not just about catching intentional evasion anymore, even small mistakes or omissions can trigger scrutiny.
And the cost of getting it wrong?
Up to 200 per cent penalty on any tax underreported
24 per cent annual interest on the shortfall
In some cases, it can lead to prosecution under Section 276C
It is not about scaring honest taxpayers, it is about staying ahead of avoidable errors. If your ITR tells one story and the AIS tells another, the onus will be on you to explain.
So before you hit “submit,” take a few minutes to cross-check everything. It’s one of the simplest ways to keep your return clean and keep yourself off the tax department’s radar.
