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Published on 28 July 2025

Challenges and Solutions for Taxpayers Navigating Annual Information Statement (AIS) Issues

Why Taxpayers Struggle with AIS Despite Its Promise

The Annual Information Statement (AIS) was introduced to make tax compliance more transparent, giving taxpayers a single window into all their financial transactions as reported by banks, brokers, registrars, and other third parties. In theory, it’s a much-needed step toward smoother ITR filing.

Top Issues Faced by Taxpayers While Using AIS

1. Errors in Capital Market Transactions

  • Mismatch Between Trade and Reported Values: A frequent complaint is that AIS reports incorrect figures for equity transactions. For instance, instead of the actual buy or sell price, the system might pick up settlement amounts or closing prices. This skews your capital gains or losses—potentially by lakhs of rupees.

  • Phantom Entries and Duplicates: Some taxpayers—even those without any demat accounts—have seen capital market activity wrongly attributed to them. This may be due to errors by intermediaries or systemic glitches causing trades to be duplicated under unrelated PANs.

2. Jointly Held Assets Create Confusion

  • Full Amounts Reflected for Each Owner: In cases of jointly owned property or investments, the AIS tends to show the entire transaction value for both parties. So, if two siblings co-own a flat, each might see the full sale amount reported in their AIS—making it look like they each earned more than they did.

  • No Option to Declare Share: There’s no provision in AIS for taxpayers to specify their actual ownership share. This creates problems during scrutiny, where the burden falls on the taxpayer to prove they’re not liable for income that technically belonged to someone else.

3. Gifting and Property Transfers Misrepresented

  • Gifts Mislabelled as Sales: Transfers within family—like a father gifting a house to his daughter—can show up as sales in AIS because sub-registrars don't clearly differentiate between sale deeds and gift deeds. This can lead to notices for capital gains tax on what was actually a tax-exempt transaction.

  • One Deal, Multiple PANs: In multi-party property deals, it’s not uncommon for the same transaction to be reported against multiple PANs, inflating the activity and income recorded in each person’s AIS.

4. Inaccurate Interest Reporting

  • Maturity vs Accrual Mismatches: Interest on FDs or recurring deposits may be reported only upon maturity, rather than year-wise accrual, which throws off your annual income calculations.

  • Overlapping Reports from Multiple Sources: A single FD might get reported by both the bank and a corporate branch, leading to the same income appearing twice in your AIS.

How These Errors Impact You

  • Refunds Get Delayed: If your return doesn’t match AIS—even because of a third-party error—your refund may be withheld pending clarification.

  • Scrutiny and Notices: Mismatches can trigger automatic compliance alerts, demanding explanations, supporting documents, or even revised returns.

  • You Must Prove You're Right: Even if your ITR is completely accurate, it’s up to you to disprove the AIS if there's a discrepancy. This can mean hours spent gathering trade contracts, bank statements, gift deeds, or property agreements.

Smart Practices to Stay Ahead

  • Reconcile Before Filing: Always cross-check AIS data with your Form 26AS, TIS summary, demat contract notes, bank passbooks, and investment statements.

  • Use the AIS Feedback Tool:

    • Mark transactions as "incorrect," "duplicate," or "belongs to another PAN" directly on the AIS portal.
    • Track the resolution status—reporting entities can now accept, partially accept, or reject your feedback in real time.
    • Keep screenshots or receipts of submitted feedback in case you’re asked to explain.

  • File Your Return On Time Anyway: If mismatches persist, go ahead and file your ITR based on your actual records. Just make sure to submit feedback on the AIS separately and retain all supporting documents.

What Needs Fixing at the Policy Level

  • Legal Clarity: AIS is not a statutory document, yet mismatches can have serious consequences. Clear rules on how AIS data should be interpreted and contested would reduce uncertainty.

  • Feedback Should Go to the Source: A major reform would be to route taxpayer feedback directly to the original reporting institution—whether it’s a bank or sub-registrar—rather than through an indirect approval chain.

  • Split Reporting for Joint Owners: AIS should allow taxpayers to declare what percentage of an asset or investment they own. This would reduce the burden of clarification during assessments.

  • Smarter Scrutiny Triggers: Systems should be trained to distinguish between real red flags and honest discrepancies—like a gifted home or a shared investment—so taxpayers aren’t penalized for systemic flaws.

Final Thoughts

The AIS is a step in the right direction when it comes to tax transparency. But unless reporting accuracy improves, it may continue to burden honest taxpayers with extra paperwork and uncertainty. Until then, the best defence is a good offence: double-check everything, use the feedback tools, and keep a paper trail.

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