India Becomes 1st Country Where Artificial Intelligence Will Check Tax Returns

India Becomes 1st Country Where Artificial Intelligence Will Check Tax Returns

India Becomes 1st Country Where Artificial Intelligence Will Check Tax Returns

In India, the tax assessment system would now be run through artificial intelligence and machine learning.

This development is expected to make things simple and would help India to take one step ahead towards digitization. Also, this would make India one of the 1st countries in the world in the direction of employing technology on a larger scale in public tax assessment.

Nirmala Sitharaman, the Finance Minister, had announced that India would very soon become tech-friendly relating to income tax assessment. Also, this is going to be implemented very soon, from October 2019.

Artificial Intelligence and Machine Learning in Tax Assessment

Nirmala Sitharaman, the Finance Minister had promised that Artificial Intelligence and Machine Learning would be used in the procedures of income tax assessment of the public of India. The system would be implemented on 8th October 2019.

By means of adopting such advanced technology would guarantee that there shall be absolute transparency and make certain meticulousness in the whole system of tax assessment.

A senior official stated that the entire objective of the faceless assessment is dependent on the premise that tax officers are unethical and harass taxpayers. This is not only an unfair view but also undermines the honest work of the tax department. As per the official sources, the government is very specific regarding the deadline of the implementation.

A report had been recently submitted to the Finance Minister through the Steering Committee on Fintech linked issues, appointed through the Ministry of Finance, Department of Economic Affairs.

The government of India is also planning towards integrating data from MCA, Central Board of Direct Taxes (CBDT) and GS within a year which is expected to be stated in the next year’s budget.

The sources also stated that the announcement in the budget relating to the integration would be subject to a lot on the progress made on the integration of data. It would also take some time as systems are very different.

How would AI and ML bring transparency in Tax Assessment?

If any irregularity is seen in a tax payer’s assessment, there would be automatic scrutiny completed using the faceless electronic portal in which a structured questionnaire dependent on the anomaly would be sent towards the taxpayer automatically. Powered through natural language processing ability, the faceless portal shall take in the responses from taxpayers. If the system is contented with the responses, the case would be closed, otherwise, it shall be assigned towards an income tax officer for a further investigation.

For this, data would be integrated from the MCA, Central Board of Direct Taxes (CBDT) and GS, which shall take about a year.

It must be also noted that the income tax department (ITD) had previously identified numerous citizens who had not given their tax liabilities at the time of filing their tax returns for the assessment year 2018-19 by utilizing data analytics. This was the portion of the non-filers monitoring system (NMS) installed by ITD, which checks individuals for high-value transactions as well as prospective tax liabilities utilizing data analytics.

Thus the system is going faceless, and, there would be no corrupt officers as well as everything would be on the record.

For example, if an individual’s say that his TDS is deducted of Rs. 10 lakh, but the individual does not show the same income in ITR, the system would start probing into your finances.


The government has planned the deadline of 8th October 2019 for the implementation of AI and ML for the assessment purposes.

Though, several officials in the Finance Ministry consider that utilizing AI and ML in the tax assessment purposes could be detrimental to the nation.

Assesses were complaining regarding harassment because of to two main reasons for years now, that is a delay in the refund and unnecessary demands/litigation comes up in scrutiny. As per the sources within the I-T Department, unachievable budget targets are the wrongdoers which force the department towards delaying refund, fearing action from ministry. The sources in the tax department also suggested that the usage of AI and ML might lead towards a situation related to that was seen after the implementation of GST, as the government is pushing this hastily.

It is not very well known concerning how these advanced technologies shall help in solving these two issues. However, they impose a greater risk of high pitched assessment as the tax office would not be interested in hearing out the assessee and shall rather depend on computer data, adding that it is frightening for complex matters.

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eStartIndia Team

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