Author: Chinnagounder Thiruvenkatam Published Date: May 18, 2026 Last-Verified Date: May 18, 2026
The notice arrived on a Tuesday in October. ₹16,800 in additional tax plus interest, for a mismatch between the interest income declared in the ITR and the interest income recorded in the Annual Information Statement. The taxpayer had three fixed deposits. She had reported interest income of ₹18,400 – the amount credited to her accounts when two FDs matured during the financial year. The IT department’s AIS showed ₹31,200 in FD interest income for the same year. The difference was the accrual-basis interest on the third FD, which is still running and will mature next year, but which earned ₹12,800 of interest during the year being assessed – interest that must be declared regardless of when the FD pays out.
She had filed her ITR in July using a prepopulated form, verified the TDS figures against her Form 16, found them matching, and considered the job done. She had never opened her AIS. She did not know it existed.
This is the most common source of Income Tax Department mismatch notices to Indian salaried individuals: income that appears in the AIS but was not reported in the ITR. Most of it is FD interest on the accrual basis. Some of it is dividend income, rental income, or capital gains from mutual fund redemptions that the taxpayer forgot or deprioritised. The fix takes 30 minutes before filing. The notice takes three to six months to resolve after filing.
Form 26AS and AIS – Two Different Documents Doing Different Jobs
Most Indian taxpayers know about Form 26AS. Far fewer know that since November 2021, the Central Board of Direct Taxes (CBDT) has operated a separate, more comprehensive document called the Annual Information Statement (AIS) – and that the automated mismatch notices issued by the department are generated primarily by comparing your ITR against the AIS, not the old 26AS alone.
Form 26AS is a tax credit statement. It shows what taxes have been paid on your behalf – TDS deducted by your employer, TDS deducted by banks on FD interest, advance tax you paid, self-assessment tax, and refunds received. It is essentially a record of tax transactions linked to your PAN. It does not capture all your income – only the income against which TDS has been deducted.
The AIS is broader. It shows everything the department has collected about your financial activity from multiple reporting sources: banks, mutual fund houses, registrars for property transactions, stockbrokers, foreign remittance processors, and more. AIS shows not just TDS deducted but income itself – FD interest earned on accrual basis, dividends received, mutual fund redemption proceeds, rent received as reported by tenants claiming HRA, and in some cases even high-value cash deposits.
Before filing, you need to check both. Form 26AS confirms your tax credits are correctly recorded. AIS tells you what income the department expects to see in your return. Any income showing in AIS that does not appear in your ITR will generate a mismatch notice. The department’s systems are now significantly faster at detecting these gaps – notices that previously took two to three years to arrive are arriving within three to five months of filing.
How to Access Both Documents – Exact Steps
Go to incometax.gov.in and log in with your PAN and password. If you have not logged in before, register first using your PAN – the registration process is straightforward and takes five minutes.
For Form 26AS: After logging in, go to e-File in the top menu, then Income Tax Returns, then View Form 26AS. You will be redirected to the TRACES portal. Download the current assessment year’s Form 26AS as a PDF. Note: TRACES may ask you to verify using an OTP sent to your registered mobile or email.
For AIS: After logging in, go to Services in the top menu, then Annual Information Statement. The AIS portal opens. Go to AIS and then download. AIS downloads in two parts – Part A (general information including PAN, address, filing status) and Part B (which contains the income information you need to review). Download Part B specifically. AIS is also available as a PDF or as a JSON file; the PDF is sufficient for review purposes.
Also download your Taxpayer Information Summary (TIS) from the same AIS portal. TIS is a simplified summary of AIS that shows the net figures the department will use for comparison with your ITR. Where AIS and TIS show different figures for the same income item, the TIS figure is what matters for the ITR comparison.
The FD Interest Problem – Why Most Indian Taxpayers Get This Wrong
This is the most important section for anyone who holds fixed deposits in Indian banks.
Fixed deposit interest is taxable in India under “Income from Other Sources.” The question is: in which financial year is it taxable? The answer depends on which accounting method is used. Banks calculate and report FD interest on an accrual basis – interest earned in the financial year April 2025 to March 2026 is income for that year, regardless of when the FD matures and when the money is actually received.
Most Indian individual taxpayers report FD interest on a receipt basis – they declare interest income in the year the FD matures and the money is credited. This is intuitive. The money arrived in the account this year; therefore it is this year’s income. Unfortunately, the Income Tax Act treats interest income for individuals on an accrual basis, and the AIS reflects the bank’s accrual-basis reporting.
The result: a taxpayer with a three-year FD of ₹5 lakh at 7 percent per annum earns approximately ₹35,000 of interest per year. In the AIS for each of the three years, this ₹35,000 appears as income. If the taxpayer reports ₹0 income from this FD for year one and year two (because the FD has not matured) and then reports the full ₹1,05,000 at maturity in year three, the ITR shows ₹0 for year one and year two while the AIS shows ₹35,000 for each. Mismatch notices for year one and year two arrive after filing in each of those years.
The correct approach: every year, obtain an interest certificate from each bank where you hold an FD. Most banks now provide this through net banking – look under “Tax Centre” or “Interest Certificates” in your bank’s portal. The certificate shows the interest accrued on your FD during the financial year, regardless of maturity. Report this accrued amount as income in your ITR for the relevant year. The corresponding TDS certificate from the bank (Form 16A) should also show this TDS for the year in which interest was accrued, not only in the maturity year.
Other AIS Entries That Commonly Cause Mismatches
Dividend income from shares and mutual funds appears in AIS. Since the 2020 amendment to the Income Tax Act, dividends are taxable in the hands of the recipient. If you receive dividends on equity shares or from mutual funds, these amounts appear in AIS reported by the company or fund house. They must be declared under “Income from Other Sources” in your ITR. Dividends reinvested in mutual funds (growth option) do not appear because no payout occurs – but any dividend option mutual fund payouts will be visible.
Mutual fund redemption proceeds appear in AIS. The gross redemption amount (not the gain alone) is reported by the AMC. Many taxpayers see a large number in AIS under “Receipts from sale of units of Mutual Fund” and panic, assuming they have underreported significantly. Clarification: the AIS shows gross sale proceeds, but your ITR requires you to report only the capital gain (sale proceeds minus cost of acquisition). If your cost of acquisition was ₹2 lakh and you redeemed for ₹2.4 lakh, the AIS shows ₹2.4 lakh but your taxable gain is ₹40,000. The mismatch the department checks is whether the gain you declared is consistent with the proceeds shown – not whether you declared the full gross proceeds. Consult a tax professional if you have significant mutual fund redemptions to ensure the capital gains calculation is correct.
Rent income reported by tenants. If your tenant claims HRA deduction against rent paid to you, they are required to report your PAN in their employer’s records. This rent appears in AIS. If you have a rental property, the rent income reported in AIS by your tenants should be consistent with the rental income you declare in your ITR. Discrepancies here have triggered notices specifically to landlords who underreport rent income while their tenants correctly report the HRA claims.
High-value cash deposits and transactions. If you deposited more than ₹10 lakh in cash in a savings account during the year, or transacted in property, these appear in AIS. These entries alone do not create a tax liability – the department wants to see that you have acknowledged these transactions and can account for them. If a high-value transaction appears in AIS that you cannot explain from your declared income sources, it warrants attention before filing.
The AIS Feedback Mechanism – Use It Before Filing
This feature is almost universally unknown among Indian individual taxpayers, and it is the one that can prevent a notice for genuinely incorrect AIS entries before they cause problems.
Inside the AIS portal, each income entry has a small feedback icon. Clicking it allows you to submit a response: “Information is correct,” “Information is not fully correct,” “Information relates to other person or year,” “Information is duplicate,” or “Information is denied.” If an entry in your AIS is wrong – the amount is higher than you actually received, a transaction is recorded twice, or income earned by another family member has been incorrectly mapped to your PAN – you can flag it here with an explanation.
The IT department is supposed to review this feedback before issuing a notice. In practice, automated systems still generate notices in some cases even after feedback, but having feedback on record significantly strengthens your position when responding to a notice. It also ensures the error is flagged before you file, rather than discovered after.
For the most common error – FD interest shown on accrual basis where you want to confirm you are reporting it correctly on accrual basis too – no feedback is needed. The feedback mechanism is specifically for entries that are factually wrong in AIS, not for entries where the accrual vs receipt difference is the only issue. Correct reporting in the ITR is the solution for the accrual difference, not AIS feedback.
What to Do When Form 26AS TDS Does Not Match Your Form 16
This is a separate but equally common issue. Your employer deducts TDS from your salary every month and deposits it with the government. Once deposited, it appears in Form 26AS under your PAN. The Form 16 your employer gives you at year end should match 26AS exactly.
If they do not match, two things may have happened. First, your employer may have made a data entry error in the quarterly TDS return – entered the wrong PAN, mistyped a figure, or mapped your TDS to a different employee’s PAN. Second, your employer may have deducted TDS but not deposited it with the government – which is a serious compliance failure on the employer’s part but unfortunately does fall on you to resolve.
The process for resolving a Form 16 vs 26AS mismatch: contact your employer’s accounts or payroll team with the specific discrepancy. Ask them to check the quarterly TDS return filed with TRACES for the period where the mismatch occurs. If a data entry error was made, they can file a correction to the TDS return through TRACES. Once corrected, Form 26AS updates within a few days. Get the correction confirmed before filing your ITR.
If your employer has deducted TDS but not deposited it, you still cannot claim TDS credit that does not appear in your 26AS. File your ITR without the incorrect TDS credit, pay the additional tax due, and simultaneously raise a grievance against your employer under the Income Tax Act provisions for non-deposit of TDS. This is a legal remedy available to employees – the employer faces penalties for non-deposit. The Income Tax Grievance Portal at incometax.gov.in is where this complaint is filed.
One specific timing issue for taxpayers filing close to the July 31 deadline: the quarterly TDS return for April to June (Q1 of the financial year) has a filing deadline of July 31 for government employers and July 15 for non-government employers. If your employer has not yet filed their Q1 TDS return when you file your ITR, the Q1 TDS will not appear in Form 26AS. Do not skip the TDS for Q1 from your ITR – declare it on the basis of Form 16 and follow up with the IT department after filing if 26AS does not reflect it. This is a process issue, not an error requiring correction before filing.
Two Taxpayers – What They Found and Fixed
Anjali Sharma, 36, HR manager, Delhi. Three FDs at two banks. Had been reporting FD interest only at maturity since she began filing ITR ten years earlier. On reviewing AIS for the first time before filing the 2025-26 ITR, she found three years of accrued FD interest that had not been declared, generating the mismatch notice she had received. For the 2025-26 filing she downloaded interest certificates from both banks through their net banking portals, reported the accrued interest correctly, and also filed updated returns for the two previous years where the mismatch notices had arrived. The updated returns came with an interest component on the additional tax – the cost of not knowing this sooner. Going forward, she pulls the interest certificates every March before the financial year ends.
Sudhanshu Tripathi, 44, software engineer, Pune. Changed employers mid-year in October. Received two Form 16s – one from the old employer covering April to October, one from the new employer covering November to March. When he checked 26AS, the TDS from the new employer for November and December was missing. The new employer had made an error in their Q3 TDS return – mapped his TDS to the PAN of a different employee with a similar name. He contacted the new employer’s payroll team with the specific quarter and amount. They filed a TDS correction through TRACES within a week. His 26AS updated four days after the correction. He filed his ITR after confirming the correction reflected. No mismatch notice. The total time spent on this: approximately 40 minutes over three days of follow-up.
Frequently Asked Questions
Do I need to look at AIS or Form 26AS if I only have salary income and my Form 16 matches 26AS?
Form 26AS matching Form 16 means your TDS picture is correct. But AIS may still contain income entries beyond what Form 16 covers – savings account interest (which many taxpayers forget to declare), any dividends on shares you hold, any mutual fund redemptions during the year, or rental income if you have a property. Even a simple salaried taxpayer should open AIS and review Part B before filing. Savings bank interest above ₹10,000 is taxable (deduction under Section 80TTA applies up to ₹10,000 for individuals below 60 years), and it appears in AIS reported by the bank. It is one of the most commonly missed entries in salaried ITRs.
What if I find an entry in AIS that I cannot explain at all – a transaction I never did?
This can happen when your PAN has been incorrectly quoted by a third party in a financial transaction – a relative who used your PAN for a transaction, a bank that mapped a transaction to the wrong PAN, or in some cases, PAN misuse. Use the AIS feedback mechanism to mark the entry as “Information relates to other person or year” and provide an explanation. If you suspect PAN misuse or identity-related fraud, check the loan and credit history linked to your PAN at the CIBIL portal and consider filing a complaint with the IT department’s helpline at 1800-103-0025. Do not ignore unexplained AIS entries – they will generate a notice if they remain unresolved after filing.
I redeemed mutual funds and reinvested in different funds. Do I need to declare the full redemption amount?
You must declare the capital gain from the redemption, not the gross redemption amount as income. The gross amount appears in AIS, but what is taxable is the gain (sale price minus cost of acquisition, adjusted for indexation in the case of debt funds held for more than three years). In your ITR, go to Schedule CG (Capital Gains) and enter the details there. Equity mutual funds held for more than one year generate Long Term Capital Gains taxable at 12.5 percent above ₹1.25 lakh (per Finance Act 2024 amendment, effective from July 23, 2024). Equity funds held less than one year generate Short Term Capital Gains taxable at 20 percent. Debt funds are taxed at the applicable slab rate regardless of holding period. If the amounts are significant, a CA or tax consultant is worth engaging for this specific schedule.
The AIS shows my employer’s name and PAN incorrectly. Does this create a problem?
If your employer’s name is slightly different in AIS than on your Form 16 but the TAN (Tax Deduction Account Number) is correct, this is usually not a problem – the system matches on TAN rather than name. If the TAN itself is different between 26AS and Form 16, contact your employer’s payroll team to identify the discrepancy. Incorrect TAN mapping is rare but happens when employers restructure or when a new payroll system generates incorrect filings. In either case, the employer must file a TDS correction through TRACES before you file your ITR.
I received a mismatch notice for a previous year even though I have already filed an ITR for that year. What are my options?
You have three options depending on the nature of the mismatch. First, if the notice is correct – you did underreport income – file an updated ITR using the ITR-U provision, which allows updating filed returns within two years of the end of the relevant assessment year. Updated returns require paying additional tax plus a mandatory surcharge of 25 percent (if filed within 12 months of the assessment year end) or 50 percent (if filed between 12 and 24 months). Second, if the notice is incorrect because of an AIS error, submit feedback in AIS and respond to the notice through the compliance portal on the IT website explaining the discrepancy. Third, if the notice is for income you correctly declared but the department system did not properly match, respond to the notice through the Compliance Portal with the relevant ITR schedule reference. Ignoring a notice is never the right choice – unresponded notices escalate to demand notices with compounding interest.
Is it mandatory to file ITR if I have only FD interest income and no salary?
If your total income – including FD interest and all other sources – exceeds ₹2.5 lakh per year (₹3 lakh for individuals aged 60 to 79, ₹5 lakh for those 80 and above), filing ITR is mandatory. FD interest income is fully taxable and included in this threshold. Senior citizens whose only income is FD interest and who have TDS deducted by banks may find that their net tax liability is zero after the senior citizen deductions, but the obligation to file still applies if gross income exceeds the threshold. Failure to file when required results in penalties and interest under Sections 234A and 271F of the Income Tax Act.
Information last verified: May 16, 2026. Primary sources: Income Tax Department portal at incometax.gov.in for AIS access steps and Form 26AS download procedure, verified May 2026; CBDT notification introducing Annual Information Statement, November 2021; Income Tax Act 1961 as amended through Finance Act 2024 – Section 145 (accrual basis for interest income), Section 80TTA (savings interest deduction), Section 234A (interest for late filing); TRACES portal at tdscpc.gov.in for TDS return correction procedures; Finance Act 2024 for LTCG rate amendments effective July 23, 2024 – verified at incometax.gov.in; ITR-U updated return provisions under Section 139(8A), verified at incometax.gov.in.
Tax laws and IT department procedures change with each Finance Act and CBDT circular. Verify current provisions at incometax.gov.in before filing. For income from multiple sources, capital gains, foreign income, or business income, a registered chartered accountant or tax practitioner should be consulted. This article covers common scenarios for salaried individuals with FD interest, dividend, and rental income – it does not cover all situations.
- Anchor: “what happens when ITR is not filed for two years and the notices that follow” – https://dailyhindnews.in/not-filing-itr-for-2-years-penalties-notices/
- Anchor: “how to check whether an unauthorised loan exists against your PAN before the tax department finds it first” – https://dailyhindnews.in/check-loan-on-pan-card-india-guide/
- Anchor: “what happens to your PF when you change jobs and whether the PF income appears in AIS” – https://dailyhindnews.in/pf-transfer-changing-jobs-india/
- Anchor: “why term insurance premiums qualify for 80C deduction and what the AIS does not capture about your insurance” – https://dailyhindnews.in/term-insurance-vs-endowment-plan-india/
- Anchor: “how to save ₹5,000 a month when a tax demand notice has disrupted the household budget” – https://dailyhindnews.in/save-5000-per-month-on-30000-salary-india/
Chinnagounder Thiruvenkatam is the Founder and Publisher of dailyhindnews.in/ and Tips Clear Media LLP, Chennai. A 25-year veteran of the Central Reserve Police Force (CRPF) and full-time digital publisher since 2016. Full author profile