How To Manage Income Tax Mismatch In ITR Filing For NRIs

The AI-driven system of the Income Tax Department cross-checks every ITR form against data from 50+ sources. The source includes banks, mutual funds, stockbrokers, property registrars, foreign remittance records, and more. For NRI taxpayers in India, this created a unique mismatch risk: NRO interest reported on the accrual basis by the bank. TDS entries made with old PANs, overseas income data shared under FATCA/CRS, rental income reported by tenants, and more.

An unresolved income error generally triggers automatic income tax notices, delays refunds, and, in worst-case scenarios, results in a full security assessment. However, there is nothing to worry about, as this in-depth guide will show NRIs exactly how to identify, fix, and resolve any type of income mismatch.

What Is Income Mismatch In ITR?

An income mismatch generally occurs when either the income or tax credit figures that you have declared on your ITR do not match the data the income tax department has independently collected about you from third-party sources. Under Section 143(1), the ITD uses a simple automated processing system that compares every ITR information you have filed in the form against its own database, and if any discrepancy or unexplained information is found, it triggers an automatic communication or demand.

Talking specifically about NRIs, for your income matches are more frequent than they are for resident indian because of your multi-source nature of income. For example, TDS is deducted by banks, mutual fund houses, buyers, and tenants, and each of them requires filing a separate TDS return. The multi-source nature of NRI income includes income that accrues in India while an NRI lives abroad, as well as foreign assets generating data through international information exchange. Any gap between what these sources report and what NRIs declare on their income tax return is flagged.

Form 26AS, AIS, & TIS Explained

As a taxpayer in India, before you reconcile, you must understand the three documents the Income Tax Department uses to track your income. Each of them serves a different purpose and must be checked separately before you file your ITR.

The following table clearly demonstrates the differences among the three essential documents.

Note: If your Form 26 AS and AIS show different income figures from the same source, go ahead and investigate the AIS figure, as it is a more detailed and complete document. AIS encapsulated the income even where no TDS was deducted, for example, NRO savings interest below the TDS threshold, mutual fund distributions, and more. Experts recommend using the Annual Information Statement to ensure all income is reported, whereas you must use Form 26AS to verify the TDS credits and claims.

Filing ITR without checking both documents is the primary cause of automated mismatch notices.

Common Mismatch Causes Specific To NRIs

Both NRIs and residents filing ITR in India often face general mismatch issues; however, NRIs often have a different set of mismatch triggers due to their multiple-source information profiles, non-resident status, and the way Indian financial institutions process NRI-specific transactions.

NRO FD interest - Accrual vs Receipt Basis Mismatch: Bank repeats FD interest on an accrual basis, meaning year by year as it accrues, whereas most NRIs declare it on a receipt basis only when the FD matures. This is the single most common NRI mismatch because assume that the bank reports Rs 50,000 in AIS for year 1, but the NRI declares Rs 0 (waiting for maturity). The income tax department saw this Rs 50,000 discrepancy and issued a notice.

TDS Deducted with the Wrong PAN or an Old Resident-era PAN: Buyers, banks, or tenants sometimes use an incorrect PAN (for example, due to digit transposition) when filing TDS returns. Which is why the TDS appears in someone else's Form 26AS or does not appear in yours, creating a TDS mismatch.

Rental Income Received by the Tenant But not Declared in the ITR: The tenant should deduct TDS at 31.2% under section 195 and file Form 27Q quarterly. The AIS system captures this rental income. Now, if the NRIF fails to declare it or tries to under declare it, the AIS will trigger a mismatch.

Mutual Fund Transactions Reported by RTAs (CAMS/KFintech): Mutual fund buy/sell/SIP transactions are reported to the IT department by the Register and Transfer Agents. The Redemption might appear in the AIS even if no TDS was deducted below the threshold. NRI taxpayers who forgot to declare those small redemptions generally face mismatch issues.

The Property sale proceeds reported by the Sub-Registrar: As an NRI, when you sell a property in India, the registration of your share proceeds is with the Income Tax Department. If the capital gains you have declared in the ITR do not match the sale consideration that the register returns, an income mismatch has occurred.

The foreign remittances received are reported under FATCA/CRS/FEMA: The bank received large inward remittances from abroad. If the ITR department is unable to match this remittance to a declared income or an existing source, then I may query the transactions.

Dividends From Listed Companies: Dividends from Indian companies are reported to the AIS by the company (RTA). NRIs who received dividends from indian stocks are required to declare them as they are taxable at the same rate with 20% TDS. If you miss this, it will create an AIS mismatch.

Capital Gains from Debt Mutual Fund-Section 50AA: After April 2023, debt fund gains are taxed at the same rate as income. AMCs generally replicate these transactions in AIS. NRIs who do not have a Consolidated Account Statement (CAS) and miss our reporting of these small gains will face this mismatch.

Types Of Income Mismatch Faced By NRIs

The following are the types of income mismatch that you, as an NRI, can fall into. Each mismatch has an example to help you understand it more easily.

The TDS Credit Mismatch: This generally occurs when the TDS claimed in the ITR does not match the TDS in Form 26AS. For example, you claim Rs 31,200 TDS on NRO interest in your ITR, but Form 26AS shows Rs 0 because the bank filed Form 27Q with an incorrect PAN. In such a case, you cannot claim TDS that is not in 26AS without first correcting the TDS return.

AIS shows income not declared in ITR: Also known as the income omission mismatches. Assume that your AIS shows Rs 75,000 in NRO interest, Rs 12,000 in dividend income, and Rs 3,40,000 in mutual fund transactions, but your ITR shows only Rs 75,000 in interest. The dividends and the mutual fund gains are missing from your ITR and are flagged automatically.

Accrual vs. Receipt Mismatch: To understand this mismatch, read the following example. Your bank reports Rs 42,000 of FD interest in AIS for FY 2024-25 on an accrual basis. But you then declare Rs 0 because the FD matures in FY 2025-26. Now the IT systems see those Rs 42,000 as the unreported income. Hence, the correct approach here is to recognize interest on an accrual basis.

Foreign Income Mismatch or the FATCA/CRA-reported vs ITR-declared: Assume that your NRO account received Rs 25 lakh in inward foreign remittances. The AIS will show this as a transaction, and your ITR does not explain the source. Further, if the IT department enquires about you, you will need to demonstrate that it was a capital transfer, non-taxable, and not income.

Capital Gains Mismatch: To understand capital gains mismatch, consider this example: you sold a property for Rs 1.2 crore. The sale deed is registered, and the Sub-Registrar reports Rs 1.2 crore as consideration in AIS. Now your ITR shows Rs 30 lakh as LTCG on a cost basis. The system requires matching the sale value, and your calculation worksheet must support the difference.

Rental Income Mismatch- Assume that the tenant deducts the TDS of 31.2% on Rs 6 lakh annual rent and files Form 27Q. The AIS captured Rs 6 lakh paid to you. Your ITR shows Rs 4.2 lakh (after 30% standard deductions). The mismatch is in the comparison of gross rent to the NAV figure in AIS. You must reconcile gross rents, then deductions.

How To Reconcile AIS With Your Income Records - Step-by-Step Approach

As a taxpayer, you must reconcile your accounts at least 3-4 weeks before filing your ITR. This allows you time for corrections at the source (deductors are correcting TDS Returns) if needed.

The following is a step-by-step approach to reconciling AIS with your income records.

Download all four documents simultaneously.

From incometax.gov.in, download: (a) Form 26AS, (b) AIS PDF and JSON export, (c) Tax Information Summary (TIS), and (d) your AIS feedback report if you have submitted any of the previous corrections. Having all four essential documents in the same session will prevent confusion caused by version differences.

Gather All Source Income Documents Independently

You must collect all the source income documents, such as NRO/NRE bank statements and interest certificates; Form 16A from all TDS deductors, such as bank, mutual fund houses, bank, CAMS/KFintech CAS (Consolidated Account Statements) for all mutual fund transactions; stockbroker capital gains statement; rental agreeement and receipts; property sale deed and cost bias documents; any dividend statement from the Indian companies.

Category-Wise Comparison: Match each income head

Avoid comparing the total; compare category by category. Check: salary income, if any; NRO interests for AIS accrual vs. your records; NRE interests must not appear in the taxable AIS; dividends from each company separately; mutual fund redemption and gains; property sale consideration; rental income; and any other AIS entries. Create a spreadsheet with three columns: AIS figure, your records, and the difference.

For each mismatch, determine who is correct:

Whenever you spot a difference, you will have a question such as: Is the AIS correct, or are your records incomplete? For this, you must include the income in your ITR. Might you also think the AIS is wrong due to data entry errors in the source? For this submit the AIS feedback is to flag the errors and contact the concerned deductor to make the necessary corrections. Is the difference explainable, for example, on an accrual vs. a receipt basis? For this, you must use the accrual basis, as required by the Income Tax Act, for the interest income.

Submit AIS feedback for incorrect entries

If the AIS shows incorrect income (not your income, a duplicate entry, or incorrect amounts), you can submit feedback via the AIS portal at incometax.gov.in. Select the entry, click on "Submit Feedback", and choose the appropriate reason (for example, "Income not received" or "Amount is incorrect") and submit the feedback.

The source (bank or the deductor) must be notified. Until the AIS figures are corrected, you can file your ITR with your own accurate income and figures, but retain the documentation supporting your position.

Contact deductors of TDS return correction if needed

If TDS was deducted but does not appear in Form 26AS due to an incorrect PAN or non-filing of the TDS return, contact the deductors right away. And ask the deductor to file a correction TDS return (with Form 27Q/26Q revision) with the right PAN details. The corrections made by deductors generally appear in Form 26AS within 7-10 working days after the revised TDS return is processed by the TIN NSDL.

7: File the ITR with reconciled figures and keep full documentation

As an NRI taxpayer, file your ITR accurately and reconcile income figures. Ensure you keep a written reconciliation note in your ITR that explains every AIS entry and how it was managed, as this note will serve as your supporting document if the Income Tax Department issues a notice. Further ensure that you keep all income certificates, TDS certificates, and reconciliation records for the last 6 years from the end of the relevant AY with you.

Understanding & Responding To IT Notices

In case of an income mismatch detection, the ITD will issue a notice. For NRIs, some of the most common notices are under Section 143(1), 143(2), and 139(9).

The following is the definition of each notice, what it means, and how to respond.

Revised Return Under Section 139(5)

If you come across an income mismatch either before or after receiving an intimation under Section 143(1), the direct solution is to file a revised return under Section 139(5). The revised return is filed to replace the original return entirely and is treated as a complete new filing. 

Please note: File a revised income tax return proactively; do not wait for the notice to arrive.

Honestly, the most cost-effective strategy is to identify and correct the mismatches before the Income Tax Department does it for you. In case you find an error or mistake after filing yur ITR, it is better to file a revised return immediately, well before the deadline passes and the assessment begins. When you file a voluntary correction, it demonstrates the taxpayer's good faith and significantly reduces the risk of a penalty. If you wait for a 143(1) demand and then respond, you are reacting to the department; if you proactively correct, everything remains under control.

An Updated Return (ITR-U) Under Section 139(8A)

When the revised return deadline (December 31) has passed, or whenever an error or omission is found after the assessment is done, filing an updated return under Section 139(8A) is the only way out. It was introduced in 2022 and further expanded. The updated return, or ITR-U, allows taxpayers to voluntarily disclose previously unreported income and pay any additional tax liability, even after years of filing the original return.

Please note: Under the Finance Act 2025, the ITR_U window has been extended to 48 months.

The budget 2025 extended the ITR-U filing window from 24 months to 48 months. This marks a major relief for taxpayers with historic income errors or omissions. This also means that NRIs who missed income in FY 2022-23 (AY-2023-24) can file ITR-U until March 31, 2028. The 70% of the additional tax rate for filing in the 36-38-month window is steep; however, it is far less punitive than the consequences of a scrutiny assessment that uncovers the same omission.

The TDS Credit Mismatch: The Causes & Fixes

The tax deducted at source credit mismatch occurs when you claim a TDS credit in your ITR (let us assume Rs 31,200 was deducted by your tenant), but Form 26AS shows a different amount or nothing at all. In such a case, the Income Tax Department's automated system will reject or reduce your refund to the extent of unverified TDS.

Common TDS Credit Mismatch causes for NRIs

The following are common causes of TDS credit mismatches for NRIs:

• The deductor quoted an incorrect PAN in their TDS return (Form 27Q/26Q).
• The deductor filed the TDS return late, resulting in TDS not being updated in 24AS at the time of filing.
• The deductor deducted the TDS but did not deposit it with the Indian government.
• The banks or financial institutions used an old resident-era PAN rather than the updated NRI PAN Card details.
• The tenant filed Form 27Q but then omitted one quarter deduction.
• The mutual fund house filed a TDS return but ended up using the corporate PAN instead of the individual's PAN card.

How To Fix TDS Credit Mismatch

The following are tips to help you fix the TDS credit mismatch.

• Identify the Entry: Be proactive and cross-check Form 26AS vs Form 16A (TDS certificate) from the deductor.
• Contact the Concerned Deductor: Ask the deductor to verify their TDS return and file a correction if the wrong PAN is used or TDS is not deposited in a timely manner.
• File ITR with Accurate Figures: Ensure you claim TDS only for the amount confirmed in Form 26AS; avoid claiming unverified TDS.
• After Correction by the Deductor: Once the deductor has made the corrections, check 26AS again (wait at least 7-10 days post the correction), then file the revised ITR to claim the corrected TDS credit.
• If the Deductor Fails to Correct: Then in such a case, file a grievance on the TRACES portal (tdscp.gov.in) citing the Deductor's TAN and the incorrect entries.

The Pre-filing Reconciliation Checklist For NRIs (AY 2026-27)

The following is the pre-filing reconciliation checklist for NRIs. It is advisable to complete this checklist at least 3 weeks before filing the ITR.

• Download Form 26AS from TRACES (incometax.gov.in - My Account).
• Then download AIS and TIS from the AIS portal on incometax.gov.in.
• Collect all Form 16A certificates from the NRO bank (FD Interest TDS), the tenant (rent TDS), the property buyer (capital gains TDS), and mutual fund houses (dividend/redemption TDS).
• Obtain the NRO FD accrual interest certificate from the bank.
• Download CAMS/kFintech CAS (Consolidated Account Statement) for all mutual fund folios
• From the concerned stockbroker for all equity and securities transactions, obtain the capital gains statement.
• Reconcile the AIS interest income entries against your bank's accrual certificate, using the accrual basis for ITR.
• Verify that all TDS entries in Form 26AS match the amounts in Form 16A and that the correct PAN is quoted.
• Please check the AIS for any dividend, mutual fund redemption, or property transaction entries you did not expect.
• Now submit the AIS feedback for any incorrect AIS entries (such as a wrong amount, not your income, or duplicate entry).
• Contact the deductor to file the TDS return correction for any entries that happened with the wrong PAN in Form 26AS.
• Verify that the resident status shows as "Non-Resident" on the ITR portal (My profile section).
• Ensure you file ITR-2 and ITR-3 if you have business income, not ITR-1 or ITR-4.
• Check whether large inward foreign remittances are shown in the AIS as explainable capital transfers or foreign direct investment (not income).
• Prepare a written reconciliation note explaining each AIS entry and its ITR treatment (use it as your notice response to the document).

The Bottom Line

Income mismatches are more than just a filing inconvenience for NRIs; they trigger scrutiny notices, delay refunds, and impose hefty penalties. Hence, the smartest approach is always being proactive: reconcile your AIS, Form 26AS, and income records well before filing, correct errors at the source, and file a revised return if needed.

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