lipped from: https://taxguru.in/income-tax/government-income-file-itr.html
Summary: Arjun discovered the reality of the modern tax system when he accessed his AIS, realizing that the government already had a detailed record of his entire financial life—salary, FD interest, mutual fund redemptions, credit card spends, property transactions, and even international travel. Most taxpayers think their income is known only after filing ITRs, but 70–90% of financial information is automatically collected through banks, employers, brokers, registrars, and other institutions. AIS and Form 26AS consolidate this data, while PAN and Aadhaar link it across systems to detect mismatches. Banks report high-value transactions and interest, employers submit salary and TDS data, and brokers and property registrars provide investment and property records. Even luxury purchases and foreign travel are tracked under SFT rules. Filing ITR does not inform the government of new data but confirms and corrects pre-existing information. Any discrepancies trigger alerts or scrutiny, making it almost impossible to hide income from the system.
Meet Arjun —
Arjun always assumed the tax system was too huge to notice someone like him.
His favourite dialogue was:
“I’ll show what I want. How can they track everything?”
But when he opened his AIS, reality hit him harder than he expected.
- His salary (exact amount)
- His FD interest (even the ₹97 he forgot about)
- His mutual fund redemptions
- His credit card spends
- His property purchase
- Even his international flight to Dubai
Everything — neatly listed.
Everything — already known.
All of it was already sitting there, waiting for him.
Arjun didn’t blink for a solid 10 seconds.
He looked at the screen the way someone looks when they realise the “private mode” wasn’t so private after all.
And that’s when he finally understood:
“I haven’t filed anything… but they already know everything.”
Now let’s break down how the government gets this information.
1. Wait… How Do They Know Before You Tell Them?
Most people think the government finds out their income only when they file their ITR.
Wrong.
By the time you start filling the return, the Income Tax Department already has 70–90% of your financial information — neatly organised in their systems.
How? Because every financial institution that you deal with reports your data directly to the government.
They simply match you with the data using your PAN + Aadhaar.
2. The Core System Behind Everything: AIS & 26AS
AIS (Annual Information Statement) is basically a Google search history of your entire financial life, but made by the government.
It auto-collects:
- All your bank/UPI transactions that cross a threshold
- Your investments
- Your property-related payments
- TDS deducted by anyone
- Interest earned, rent received, dividends
- High-value purchases
- PAN-linked transactions
- And even some cash deposits/withdrawals
26AS supports AIS — a clean summary of taxes deducted, advance taxes, TCS, refunds etc.
So when you start your ITR… the system already knows almost everything.
3. Where Exactly Does This Income Information Come From?
Every financial move you make triggers a “silent alert” to the Income Tax Department.
Let’s break it down:
a) Banks → Report Your Money Flow
Banks must report the following:
- Cash deposits/withdrawals above ₹10 lakh
- Savings account interest (even ₹50 is reported)
- Fixed deposit interest
- Credit card payments above ₹1 lakh (cash) or ₹10 lakh (online)
- High-value transactions under SFT (Specified Financial Transactions)
Result:
Even if you don’t tell the government, your bank already has.
b) Your Employer → Reports Your Exact Salary
Every company files:
- Form 16 details
- PF contribution
- TDS deducted monthly
- Your allowances + perquisites
This directly flows into the TRACES system.
That’s why the government knows your salary even before you upload your Form 16.
c) Your Broker/Mutual Fund House → Reports Your Market Activity
Brokers, CDSL/NSDL, AMCs, and RTA all report:
- Mutual fund investments
- SIPs
- Equity buy/sell
- Dividends received
- Capital gains
That’s why capital gains auto-fill in your ITR.
d) Registrars & Sub-Registrars → Report Your Property Details
Whenever you:
- Buy a flat
- Sell land
- Pay stamp duty
- Execute a registry
- Take a home loan
These details are sent to the Income Tax Department.
Even rental income often gets picked up if:
- Tenant deducts TDS, OR
- You provide PAN for rent receipts for HRA
e) Passport, Airlines, Hotels → Yes, They Report Too
Under SFT rules, the following are also tracked:
- Foreign currency purchases
- International travel costing above certain limits
- Hotel bills
- Luxury item purchases
- Jewellery purchases
Your lifestyle signals your probable income.
f) Tax Deductors Everywhere Add to the Data
Wherever TDS/TCS is deducted:
- Banks
- E-commerce sites
- Food delivery apps (for sellers)
- Government departments
- Companies
All of them send your exact PAN-linked data.
4. The Real Game: Matching Your PAN Across Systems
Your PAN is the master key.
Whenever you do anything that involves:
- PAN
- Aadhaar
- Mobile number
- Bank account
- Demat account
All these systems are now interlinked.
Result?
The government doesn’t need to “catch” you. The system automatically detects mismatches.
5. What Happens When There’s a Mismatch?
If your declared income doesn’t match AIS/26AS:
1. You get an ITR mismatch alert
2. You get an e-Campaign notice
3. In bigger cases — an scrutiny notice
This is why mistakes like:
- Not reporting savings account interest
- Not reporting stock sale loss/profit
- Showing fake deductions
- Not reporting freelance/paytm income
…get caught immediately.
6. So… Is The Government Basically Tracking You?
Not in a creepy way — but yes, your financial footprint is almost fully visible.
And it’s not because of surveillance.
It’s because every financial institution is required by law to report your transactions.
Think of it like this:
You don’t tell them your income.
But everyone around you already has — and they all report it.
7. Then What’s the Purpose of Filing ITR?
If the government already knows your income, why file it?
Because they want YOU to confirm that the data is correct.
Filing ITR is not telling them something new — it’s confirming:
- Yes, this is my income
- Yes, these are my deductions
- Yes, this is my final tax calculation
ITR = Confirmation + Correction.
AIS = Raw data.
ITR = Your verified version.
8. Final Thought: You Can Hide, But Your PAN Cannot Today:
- Your UPI spending
- Your FD maturity
- Your credit card EMI
- Your Amazon business income
- Your rent
- Your salary
- Your investments
…all leave a PAN-linked digital footprint.
That’s why the government knows your income even before you do.
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