Income Tax Dept. Leverages AI and Data Analytics to Identify Tax Evasion and Improve Regulatory Adherence

The Income Tax (I-T) department is leveraging Artificial Intelligence (AI) tools for data analytics to identify tax evasion and improve regulatory adherence. This method is being used to keep an eye on financial transaction data to make a comparison between past and current Income Tax Returns (ITR).

The Income Tax (I-T) Department is taking the help of AI and data analytics to track high-value transactions, property investments, and credit card usage. This assists them in comparing people’s income declarations with their actual financial activities to spot possible tax evasion. It makes their risk assessment more efficient and transparent.

By using AI tools in tax operations, the system can now monitor activity in real-time, better manage resources, and work with less manual effort. This also helps build a more transparent system and encourages people to file their taxes honestly.

According to senior officials, AI is helping the department analyse large amounts of data, find unusual patterns, flag suspicious cases, check GST registrations, and stop fake claims for input tax credits.

A senior tax official added that AI tools are taken into used to compare a person’s current and past income tax returns to find mismatches and spot anything unusual.

Apart from this, the I-T department is utilising machine learning models to assess tax returns, predict probable violence and mechanized risk-based audits to cut down manual intermediation. Machine learning models identify data to analyse and find patterns that help identify massive discrepancies or unusual facts in reported income, deductions claimed, or sources of income. This identifies potential cases of tax evasion or under-reporting.