Decoding AIS: The Intended Solution That Became a Puzzle

As everyone is busy filing their taxes, today's article aims to guide on a document that was introduced by the government to ease the tax filing process.

Annual Information Statement (AIS), introduced by the Income Tax Department in 2021 to make ITR filing easier for taxpayers, as it is more comprehensive and detailed than 26AS. The idea behind AIS was to use it as a tax book for filing returns.

However, this has led to increased complications in tax filing rather than easing the process.

Reasons for Complications:?

1. Incorrect Reporting of Cost of Acquisition

There were numerous cases where the cost of acquisition, or purchase price, of equities is being reported incorrectly this year. Further making the matter worse, the responsibility of correcting these errors lies with the taxpayers only.

?2. Data Mismatches

Secondly, there are mismatches arising in data reported by the broker and the depository. As the market follows T+1 and T+2 settlement cycles for stocks and MF redemptions, the broker or asset management company (AMC) will report the price on the day of the sale, whereas NSDL (National Securities Depository Limited) will report the share price or NAV on the next or second day after it is sold. So if you have sold shares on 30 and 31 March this year, it will not appear in the AIS and will be reported in FY25’s statement.

3. Duplication of Entries

Thirdly, with several intermediaries involved, there are instances of duplication of entries for the sale of securities. When a mutual fund is being sold through one broker, which is connected with CDSL, the latter will report the sale transaction as provided by that broker. Additionally, since mutual funds are governed by CAMS and KFintech, which are also reporting entities, they also report the same transaction, leading to duplication.

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Further, although AIS is a comprehensive statement with details of almost all transactions, derivatives (futures and options or F&O) and intraday trades have still not found a place in it, which leads to taxpayers not mentioning these details, thinking it is not required.

With many corrections expected in the future, whether AIS will achieve what it was intended to deliver remains to be seen.

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