September 24, 2023

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Government of India set to revolutionize taxation using data analytics

The development of technology has proved beneficial for the finance industry. Predicting the future using Artificial Intelligence (AI), Data Analytics and Machine Learning (ML). Thus the Government of India is using this technology in a complex process like taxation to make tax filing more efficient, free of official discretion and business- and taxpayer-friendly. Here’s how artificial intelligence, machine learning and data analytics are being used in taxation in India.

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Data Analytics in Taxation Process

Using data analytics to identify fiscal risks, suspicious trends and patterns and risky entities in Customs and GST by leveraging big data. The government uses AI, machine learning and data analytics to identify cases with a high risk of tax evasion and high potential for income generation for further investigation. They are also identifying taxpayers for sending reminders for advance tax payments and indicating specific taxpayers about apparent mismatches in Income Tax Returns (ITRs) and transactions made so that taxpayers can revise their returns.

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Advanced Analytics in Indirect Taxes (ADVAIT)

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In 2021, the Government of India launched a project – ADVAIT (Advanced Analytics in Indirect Taxes), which also harnesses the capabilities of big data and artificial intelligence and will revolutionize the taxation system. ADVAIT has been envisaged with the threefold objective of increasing indirect tax revenue, increasing taxpayer base and supporting data-driven tax policy. ADVAIT aids and assists the officers in their day-to-day tasks, ranging from reporting and ensuring tax compliance to detecting tax evasion. Companies can use these trends to predict future results. The developers designed and developed it into a knowledge-driven data ecosystem using advanced data warehousing business intelligence solutions keeping in mind the 3 I’s: Information, Insight and Intelligence.

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Using Big Data Techniques for Taxation System

The Government of India is also using big data technologies to store and effectively search information by the Income Tax authorities. Using data analytics across taxpayer networks, they can visualize taxpayer relationships and flag potentially high-risk transactions. Using data analysis techniques for segmentation of taxpayers to focus the campaign on high risk cases from tax evasion point of view. All these technologies will make the taxation process easier for its users.

AI for Tax Prediction
AI is used for tax forecasting in India

Artificial intelligence can improve the method of tax forecasting, from rudimentary modeling techniques to advanced predictive analytics. AI algorithms can analyze corporate or seasonal data to help identify trends across different tax filing cycles. One can use these trends as a basis to predict what is going to happen next.

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Benefits of using AI, machine learning and data analytics in taxation process

Benefits of using Artificial Intelligence, Machine Learning and Data Analytics in the taxation system.
There are many benefits of using AI, machine learning and data analytics in taxation.

Identification of high-risk cases: AI and data analytics can help identify taxpayers who are at high risk of tax evasion. This allows the tax authorities to investigate these cases further. Reduction in discretion of officers: Use of technology helps in reducing discretion of officers, making the taxation process fairer and more transparent. Increase in taxpayer base: AI and data analytics can help in expanding the taxpayer base. Identification of high risk cases and enhanced tax compliance. Increased revenue: By detecting tax evasion and improving compliance, AI and data analytics can help increase revenue for the Indian government. Better tax forecasting: AI algorithms can analyze corporate or seasonal data to help identify trends across different tax filing cycles. AI algorithms can use these trends as a basis for improving tax predictions of what will happen in the future. More Efficient Tax Filing Process: By using technology, the tax filing process becomes more efficient, effective and business- and taxpayer-friendly.

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our say

The use of AI, machine learning and data analytics in the taxation process is a game-changer for India. With ADVAIT, officials can ensure tax compliance, detect tax evasion and increase indirect tax revenue. Using big data techniques, data analytics and AI algorithms, they can identify high-risk cases and visualize taxpayer relationships to flag potentially high-risk transactions. These techniques help in reducing the discretion of the officers and increasing the taxpayer base. Using technology to make the tax filing process more efficient and business- and taxpayer-friendly.


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