Got tax alert on property deals or foreign assets? I-T dept explains why

Authorities clarify that compliance alerts for high-value transactions are prompts for voluntary correction rather than a precursor to enforcement action

The Income Tax Department has said emails sent to certain taxpayers about high-value transactions, foreign assets and mismatch in documentary information are not alerts about punitive action but are meant to prompt voluntary correction.

 

Such communication is sent when there is a gap between disclosures made in Income Tax returns (ITR) and information reported to the department by banks, registrars, employers and other entities, it said. Taxpayers are advised to review their Annual Information Statements (AIS), submit feedback on the compliance portal and, where required, revise or file a belated return before December 31, 2025, the last date for assessment year 2025–26.

 

Hari Raheja, advocate at D.M. Harish & Co, said AIS captures high-value financial activity linked to a PAN but it does not automatically mean additional taxable income. “Transactions such as large bank deposits, property purchases, mutual fund investments or foreign currency spending are reported under the Statement of Financial Transactions framework. Many of these may be non-taxable, including gifts from close relatives, inheritance, redeposit of one’s own cash withdrawals, or legitimate agricultural income,” he said.

 

Taxpayers must be able to substantiate such claims, said Raheja. The onus lies on the recipient to prove the source, genuineness and capacity of the payer through documentary evidence.

 

AIS feedback versus revising the return

Ritika Nayyar, partner at Singhania & Co, said taxpayers should use the AIS feedback option when the information in it is incorrect, duplicated or wrongly attributed, such as in joint property purchases where the full value appears in each co-owner’s AIS. “Feedback cleans up the data trail. But if the information is accurate and income was missed in the return, only a revised or belated ITR can resolve the mismatch,” she said.

 

A frequent mistake is acknowledging that AIS data is correct without subsequently amending the return, leaving the discrepancy legally unresolved, said Nayyar.

Ignoring alerts can escalate matters

Niyati Shah, vertical head for personal tax at 1 Finance, said that while emails about AIS are not punitive, prolonged inaction can trigger scrutiny. “These alerts are part of a compliance ecosystem designed to encourage early correction. If ignored, they can progress to formal notices, tax demands with interest and even penalty proceedings,” she said.

 

Shah said early warning signs include repeated unreconciled AIS entries, persistent mismatch alerts and pending actions on the e-filing portal. Taxpayers should promptly reconcile AIS with their records, respond through the portal and retain supporting documents to prevent automated nudges from turning into full-fledged assessments.