Why you shouldn’t rely on AIS for reporting stocks, MFs, derivatives in your ITR


The idea is to use it as a tax book while filing returns. However, instead of easing compliance, it has often increased the burden on taxpayers mostly because details related to equity transactions in the statement are inaccurate. To make matters worse, the onus of fixing the errors lies with the taxpayers. 

Experts said the cost of acquisition, or purchase price, of equities is being reported incorrectly this year. “The cost of acquisition of equity assets bought before February 2018 is taken as the FMV (fair market value) as on 31 January 2018 due to the grandfathering provisions,” said Deepak Kakkar, a Delhi-based chartered accountant and senior manager, Jaikumar Tejwani & Co LLP. 

Long-term capital gains (LTCG) on equity are grandfathered till 31 January 2018, which means gains accrued up to this date are exempt from the 10% LTCG tax. Due to this provision, in many cases, the purchase cost of shares or equity mutual funds (MFs) is being shown as the FMV of the capital asset as on 31 January. This leads to inaccuracies as the taxpayer has to consider the original cost of acquisition to calculate the extent of gains that are exempted and consequently, determine the taxable capital gains basis the FMV of the stocks or MFs as on 31 January 2018.  

Reporting errors from intermediaries

Apart from the errors arising due to the grandfathering clause, reporting errors are also happening at intermediaries’ end, as per Sujit Bangar, founder, Taxbuddy.com. “It is common to see mismatches in data reported by the broker and the depository,” he said.

Markets follow T+1 and T+2 settlement cycles for stocks and MF redemptions, respectively. Due to this, for equity assets sold during the year, 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 as on the next or second day after it is sold. This leads to a mismatch in the broker’s or capital gains statement and the entries in the AIS. It is advised that taxpayers rely on the statements given by the broker or the capital gains statement for reporting. 

Due to this lapse, the trades done at the end of the financial year are also missing in the AIS, said Karan Batra, founder, charteredclub.com. “Shares sold on 31 and 30 March this year have not appeared in the AIS and will be reported in FY25’s statement,” he said.

Besides, with several intermediaries involved, there are instances of duplication of information. “There can be duplication of entries for the sale of securities. For example, if you sell a mutual fund through Zerodha, which is connected with CDSL, the latter will report the sale transaction as provided by Zerodha. Additionally, since mutual funds are governed by CAMS and KFintech, which are also reporting entities, they also report the same transaction, leading to duplication and inflated sales figures in AIS,” said Bangar.

He added that reporting errors are seen in complex transactions, such as bonus issues, stock splits, or mergers and acquisitions as well as due to timing issues. “There could be delays in updating transactions or errors during data transmission from intermediaries to the tax authorities,” he said. 

F&O, intraday trades  

Though 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 place in it. In intraday trades, shares are bought and sold within the same day before the market hours close without taking physical delivery of shares in the demat. 

Taxpayers often think that since these are not reported in the AIS, they don’t have to declare them in the ITR either if there are no gains. However, taxpayers must report F&O and intraday trades even if there are losses.  

Taxpayers should refer to the data on intraday trades and F&O as given in the broker’s statements.

Corrective steps    

Besides equity transactions, details of dividend and interest income are inaccurate in the statement for many taxpayers, Bangar pointed out. 

As a first step, taxpayers must check all entries, and not just equity transactions, in the AIS with Form 26AS, capital gains statements, depository records, contract notes, brokerage statements and banks’ certificates. 

Also Read: F&O trading: Do retail investors really need Sebi’s big brother oversight?

In case of a mismatch, for reporting in ITR, chartered accountants (CAs) advise that taxpayers take the figures as given in the reporting entity’s statements.

However, taxpayers should also flag the discrepancies to the IT department. Failure to give feedback on the AIS may be seen by the tax department as agreeing to the information given in the AIS and yet misreporting information.

In case of errors at the source, they should contact brokers or other intermediaries to rectify those errors, said Bangar.

“You can provide feedback on AIS by clicking the feedback button on a particular entry. There are various options for feedback types, including information is denied, information is not fully correct, information relates to another PAN number. Choose the option which you find appropriate,” Bangar explained.

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