As taxpayers prepare their Income Tax Return (ITR) for Assessment Year 2026-27, they may find their Annual Information Statement (AIS) includes various financial transactions. According to reports from Zee News, not every financial transaction recorded in the AIS is taxable, as there may be entries of several financial transactions in the AIS which are not taxable. AIS displays a comprehensive view of information to the taxpayer before filing the return of income, promoting voluntary compliance and enabling seamless prefilling of returns. The system provides a consolidated view of various financial transactions linked to a taxpayer's PAN, including salary income, interest earned, securities transactions, TDS and other high-value transactions. As per latest guidance, taxpayers should download both AIS and Form 26AS from the Income Tax e-Filing portal and compare them with broker reports before filing their return. The AIS may display gross sale value of securities instead of taxable profit, requiring taxpayers to report the actual taxable amount such as net capital gains or business income.
Despite being the default starting point for ITR filing, AIS is riddled with errors and missing incomes, making independent reconciliation essential for accurate tax filing. According to Mint, AIS captures all income and transaction information reported by employers, banks, brokers, mutual funds and other financial institutions, but experts warn it's not a complete source of information. "It is saddled with errors and is even missing some incomes, like SGB (Sovereign Gold Bond) interest, SSY (Sukanya Samriddhi Yojana) and in some cases, accrued annual interest from FDs (fixed deposits)", pointed out Bhawna Kakkar, founder and CA, Kakkar & Co. Any discrepancy in what is reported in ITR and what appears in the AIS gets flagged, with taxpayers receiving notices for mismatches between reported incomes. Taxpayers should use AIS as a reconciliation tool, matching every income entry with Form 16, Form 26AS, bank interest certificates, broker and mutual fund capital gains statements, and other supporting documents before filing the return.
According to the report, savings account deposits and withdrawals are not taxed as they are considered existing, already-taxed money moving in or out. Only the interest earned on the deposit is taxable. Similarly, fixed deposit opening or closure does not attract tax on opening or return of original principal amount, though interest earned is fully taxable according to income tax slab. Recurring deposit transactions involve post-tax money, with no tax on principal contributions, but interest earned is fully taxable. Mutual fund purchases do not trigger income tax, with taxes only applicable when income is earned through selling, redeeming, or receiving dividends. Property purchase does not directly attract income tax, though 1 percent TDS must be deducted on behalf of the seller if the property's sale value or stamp duty is ₹50 lakh or more. Salary credited to account is not taxable at the exact moment as employers already deduct required income tax before the money reaches the bank. Credit card bill payments do not attract income tax on the amount used to pay bills, though the transaction may be reported in the AIS.
When selecting the correct ITR form for Assessment Year 2026-27, taxpayers must review their AIS, Form 26AS, capital gains statements, foreign asset details, business/professional receipts and investment transactions before making their choice. As per Financial Express, ITR-1 (Sahaj) is applicable to resident individuals having total income up to ₹50 lakh from salary/pension, two house properties, and other sources such as interest income, along with agricultural income up to ₹5,000 and long-term capital gains up to ₹1.25 lakh from listed equity shares or equity-oriented mutual funds. However, certain transactions may make a taxpayer ineligible for ITR-1 and require switching to ITR-2 or ITR-3. ITR-2 applies to individuals and HUFs having income from salary/pension, capital gains, multiple house properties, foreign assets/income, agricultural income exceeding ₹5,000, unlisted shares, ESOPs, or company directorships. ITR-3 is for individuals and HUFs earning income from proprietary business or profession, including partners in partnership firms (other than LLPs), F&O trading, or holding unlisted shares. Filing the wrong ITR form can lead to defective return notices, delay processing of the return, delay refund issuance and future tax compliance.
