Income Tax: How will AI, Machine learning, and data analytics simplify tax process in India?

Income Tax: The evolution of technology has proved to be beneficial for the finance industry. Artificial Intelligence (AI), data analytics, and machine learning (MI) are predicted to be the future. The Government of India is thus utilising this technology in a complex process like taxation to make the tax filing more effective, free of official discretion, and business- and taxpayers-friendly. 

Data analytics is being used to identify fiscal risks, suspicious trends and patterns, and risky entities in Customs and GST by leveraging big data. Here is how artificial intelligence, machine learning, and data analytics are used in the taxation process:

AI, machine learning, and data analytics in indirect taxes:

In 2021, the government rolled out a project – ADVAIT (Advanced Analytics in Indirect Taxes), this project uses capabilities of big data and Artificial Intelligence as well. ADVAIT has been envisaged with a threefold objective of enhancing Indirect Tax revenue, increasing the taxpayer base, and supporting data-driven tax policy.

ADVAIT aids and assists officers in their daily operations which range from reporting and ensuring tax compliance to detecting tax evasion. 

ADVAIT has been designed and developed in a knowledge-driven data ecosystem using some of the most advanced data warehousing business intelligence solutions, keeping in view the 3 I’s: Information, Insights, and Intelligence. 

AI, Machine learning, and data analytics in direct taxes:

The government is using AI, Machine learning, and data analytics for the following: 

-Identifying cases with a high risk of tax evasion and high likelihood of income addition, for further scrutiny. 

-Identifying taxpayers to send reminders for advance tax payments. 

-Prompting specific taxpayers about apparent mismatches in Income Tax Returns (ITR) and transactions made, so that taxpayers may revise their returns. 

-Using big data techniques for storage and effective search of information by income tax officers. 

-Using data analytics over networks of taxpayers to visualise the taxpayer's relationships and to flag potential high-risk transactions. 

-Using data analytics techniques for the segmentation of taxpayers to focus the campaign on high-risk cases from a tax evasion perspective. 

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