Reconcile the return to evidence before filing
Use tax statements, source records and books to explain differences before filing a return for a proprietor, partnership, LLP or other non-company taxpayer. This guide uses the Income-tax Act, 1961 and Rules, 1962 for the historical examples and through FY 2025–26 (AY 2026–27). The Income Tax Department identifies Form 168 under Rule 245 of the Income-tax Rules, 2026 as the annual tax statement from tax year 2026–27. Use the forms and credit rules for the actual year.
| Record | What it shows | What to verify separately |
|---|---|---|
| Form 26AS for the years covered here | Check TDS and TCS on TRACES. The department’s AIS guidance says that from AY 2023–24 only TDS/TCS information is shown in Form 26AS. | Check income-tax payment challans and the relevant AIS or payment records for advance and self-assessment tax. Older versions may have had wider fields. |
| Annual Information Statement (AIS) | Third-party information, including specified financial transactions, and feedback-related values where available. | Check coverage and amounts against source documents. Report taxable income even if absent from AIS. |
| Taxpayer Information Summary (TIS) | Category-level summary of processed values and values derived after feedback and source confirmation as applicable. Relevant data may be used for prefilling. | Review the underlying items and legal treatment. A prefilled value or feedback response does not establish taxability. |
Section 285BB and Rule 114-I govern the annual information statement framework under the earlier law. An information mismatch can prompt verification; it does not prove omitted income. The proviso to section 143(1)(a) bars adjustments under sub-clause (vi) for returns for assessment years beginning on or after 1 April 2018. Other lawful processing or assessment powers remain.
Five common differences
- Income and TDS fall in different years. The deductor may withhold on credit or payment before the income is assessable to the recipient. Rule 37BA generally links credit to the assessment year in which income is assessable, with proportionate credit where it is assessable over several years, subject to specific exceptions. Determine tax recognition under the applicable law and method; a book entry alone does not decide it.
- Securities figures use different bases. Gross sale consideration reported in AIS is distinct from gains, speculative business turnover or business profit. Classify the trades on their facts and use the appropriate computation. Maintain a contract-note and ledger bridge.
- Cash deposits are not a turnover statement. In the relevant Rule 114E table, SFT-003 covers cash deposits or withdrawals of ₹50 lakh or more in one or more current accounts, with deposits and withdrawals applied separately. SFT-004 covers cash deposits of ₹10 lakh or more in one or more accounts other than current accounts and time deposits. Check the applicable reporting and aggregation rules; reconcile loans, transfers and prior cash as well as collections.
- PAN or joint ownership differs. Compare the actual PAN, title, ownership shares and year to the information reported. Request source correction where the entry is wrong and preserve any portal feedback.
- GST and books measure different things. Bridge GST registrations and return periods to accounting revenue. Test inter-registration supplies, credit notes, advances, exclusions and cutoffs separately.
Four pre-filing steps
- Download the latest statements for the correct PAN and year from the relevant e-filing or TRACES service. Retain the export and download date, TDS certificates and payment challans. Check pending deductor corrections.
- Build an item-level bridge from books to AIS/TIS, Form 26AS, certificates and GST returns as applicable. Record gross amounts, adjustments, the tax year, proposed return treatment and evidence. Keep payments and credits distinct from income.
- Give AIS feedback using the reason actually offered for the item. Save the acknowledgment and check the later status. Ask the reporting source or deductor to correct its statement where needed. Feedback does not guarantee an instant change in TIS, Form 26AS or an assessment outcome.
- For an applicable section 44AB audit, reconcile the taxpayer’s deductor or collector reporting to Clause 34 of Form 3CD. This is separate from the taxpayer’s incoming TDS-credit schedule. Clause 27(a) is not the TDS credit reconciliation field, and Clause 33 relates to specified deductions. Use the applicable 3CA or 3CB with 3CD and keep workpapers for any tax recognition differences.
Seven worked examples
All facts and amounts are hypothetical.
1. TDS on a milestone contract advance
An LLP has a ₹10 crore contract and receives a ₹1 crore mobilization advance in March 2024. At an assumed applicable 2% TDS rate, ₹2 lakh is deducted on the advance; ₹20 lakh would be 2% of the full ₹10 crore contract. Suppose a review of the contract and tax method establishes that the entire corresponding income is assessable in FY 2024–25. Record the ₹2 lakh credit in the applicable return schedule, carrying it to AY 2025–26 rather than claiming it in AY 2024–25. If the income is assessable over several years, allocate the credit proportionately. Reconcile the amount with the certificate and statement.
2. ₹4 crore jointly owned property sale
Assume an HUF and an individual each legally own 50% of a commercial plot sold in December 2023 for ₹4 crore. Their shares of actual consideration are ₹2 crore each, before any applicable stamp-value substitution and gain computation. A single AIS property entry for ₹4 crore does not decide legal ownership. Check the deed, exact PAN, any SFT-012 entry and TDS details. Submit appropriate feedback, seek correction if needed and report on the basis of the facts. Retain the deed and share calculation; a return or feedback submission does not guarantee closure of an inquiry.
3. Cash deposits in a retail current account
A proprietor has ₹4.80 crore total sales. Opening cash is ₹1.50 lakh; cash collections are ₹1.32 crore, bank deposits ₹1.25 crore and cash expenses ₹6.50 lakh. Closing cash is ₹2 lakh. The ₹1.25 crore is tested against the current-account deposit category SFT-003. Reconcile daily sales, cash expenses and deposit slips; the cash bridge explains the deposits on the stated facts without counting the same collections as fresh sales.
4. Gross securities sales versus speculative turnover
Assume the AIS shows ₹48.50 crore gross securities sale value. For the relevant settled intraday speculative trades, positive differences are ₹48.25 lakh and absolute negative differences ₹33.75 lakh. Under the ICAI tax audit guidance, their sum is ₹82 lakh turnover; the net trading result before other expenses is ₹14.50 lakh. Reconcile the reported gross amount to contract notes. Keep a correct AIS entry as reported even if it measures something different from business turnover.
5. A dividend reported to the wrong PAN
Suppose AIS shows ₹30 lakh in dividend income but ownership and bank records establish that the taxpayer neither earned nor received it. The supported taxable amount from that entry is nil. Provide appropriate AIS feedback and ask the issuer or its registrar to verify and correct the source. If resident dividend TDS was reported incorrectly, the deductor should correct the applicable statement, typically Form 26Q for that historical period. Form 24Q is for salaries.
6. GSTR-1 to books to amounts reported for TDS
Assume the figures below are on comparable tax-exclusive bases after reconciliation, and the ₹60 lakh difference represents identified consumer sales not subject to TDS on these facts.
| Reconciliation | Amount |
|---|---|
| GSTR-1 turnover in the example | ₹8.95 crore |
| Remove taxable distinct-registration transfers excluded from consolidated accounting sales | ₹65 lakh |
| Add supported unbilled accounting revenue | ₹10 lakh |
| Turnover in the profit and loss account | ₹8.40 crore |
| Remove identified sales with no TDS | ₹60 lakh |
| Gross payments or credits matched to deductor records | ₹7.80 crore |
7. Partner PAN used instead of firm PAN
A partnership with ₹12.50 crore turnover identifies ₹4.80 lakh of TDS reported by three clients under a partner’s PAN for FY 2025–26. Where the firm is the actual payee, ask each deductor to correct the PAN and statement and verify the revised certificate and credit. Where tax was properly deducted in another person’s name but the income is assessable to the firm, apply the distinct Rule 37BA(2) declaration and reporting process. Form 13 is not that declaration. Reconcile the ₹4.80 lakh once in the firm’s tax-credit workpaper; the partner should not claim the same credit.
Frequently asked questions
1. What if an AIS entry is someone else’s transaction?
Submit accurate feedback, seek correction from the reporting source where necessary and keep proof of the actual transaction and taxpayer.
2. Can I claim TDS as soon as it appears?
Generally claim it in the year the related income is assessable, subject to Rule 37BA and any specific exception. Check the notified return schedule for each year.
3. Is gross AIS securities value speculative turnover?
No. Identify the transaction type and reconcile gross reported consideration to the legally relevant computation and ICAI guidance where applicable.
4. Does an e-Verification communication mean a scrutiny assessment?
No. Respond through the channel and by the date stated in the communication. A reconciliation can support the response, but neither feedback nor submission guarantees closure.
5. How should cash deposits be explained?
Trace each deposit to the cash book, bank record and evidence of its source, including any non-sales receipts or transfers.
6. What can automation do?
Use matching tools to flag differences and preserve evidence; review classification, tax recognition and unresolved items before filing.
Sources
- Income-tax Act, 1961, sections 135A, 143, 194C, 199, 285BA and 285BB; read with subsequent amendments
- CBDT Notification 30/2020, Rule 114-I and Form 26AS
- CBDT Notification 28/2009, insertion of Rule 37BA
- CBDT amendment of Rule 37BA(2)(i)
- CBDT Notification 74/2019, Rule 37BA(3A) exception
- CBDT e-Verification Scheme, 2021 under section 135A
- Income Tax Department SFT reporting guide, including cash and property transaction codes
- Income Tax Department AIS, TIS and feedback FAQs
- Income Tax Department guidance: Form 26AS through FY 2025–26 and Form 168 from tax year 2026–27
- CBDT Form 168 guidance under Rule 245 of the Income-tax Rules, 2026
- ICAI Guidance Note on Tax Audit under section 44AB, turnover and Clause 34
- Income Tax Department guidance on tax audit forms for AY 2026–27