The Income-tax Department has called on banks, mutual funds, companies and other reporting entities to improve the quality and timeliness of financial transaction reporting, underscoring their critical role in strengthening India’s digital tax compliance ecosystem.

According to government official sources, the Annual Information Statement (AIS) framework has emerged as a key tool in making tax compliance more transparent and taxpayer-friendly by allowing individuals to access PAN-linked financial information through the income-tax portal.

The AIS consolidates details such as interest income, dividends, securities trades, mutual fund investments, property transactions and other specified financial activities, helping taxpayers verify disclosures while filing returns.

However, officials indicated that the effectiveness of the system depends heavily on the accuracy of data furnished by “Reporting Entities” through Statements of Financial Transactions (SFTs). These entities include banks, cooperative banks, mutual funds, companies, property registration authorities, foreign exchange dealers and other specified institutions.

Under Section 285BA of the Income-tax Act, 1961, read with Rule 114E of the Income-tax Rules, specified entities are mandated to file SFTs detailing prescribed financial transactions and reportable accounts. The framework will continue under the Income-tax Act, 2025. The due date for filing SFTs for FY2025–26 is May 31, 2026.

Government sources highlighted recurring issues in filings, including incorrect or missing PAN details, duplicate reporting, inaccurate transaction values, particularly in joint accounts with inadequate reconciliation of records, insufficient quality checks and delayed submissions.

Such errors can create confusion and inconvenience for taxpayers, officials said, adding that many of these problems can be avoided through stronger validation mechanisms, internal data reconciliation, timely filing and periodic quality reviews before submission.

The Income-tax Department is also engaging with stakeholders through outreach and awareness initiatives to improve reporting standards and reduce filing errors.