AI Prompt Over 1 Crore Taxpayers to Update Returns, Yielding ₹11,000 Crore in Additional Tax: CBDT Chairman
Through the NUDGE framework, taxpayers receive alerts to correct or confirm returns, leading to over one crore updates since 2021-22, with the correction window extended from two to four years.
Over the past four years, the Income TaxDepartment’s use of artificial intelligence tools has resulted in more than one crore taxpayers voluntarily updating their returns, leading to an additional ₹11,000 crore in tax collections, according to Central Board of Direct Taxes (CBDT) Chairman Ravi Agrawal. In an interview, Mr. Agrawal highlighted how AI powered data analysis has...
Over the past four years, the Income TaxDepartment’s use of artificial intelligence tools has resulted in more than one crore taxpayers voluntarily updating their returns, leading to an additional ₹11,000 crore in tax collections, according to Central Board of Direct Taxes (CBDT) Chairman Ravi Agrawal.
In an interview, Mr. Agrawal highlighted how AI powered data analysis has helped identify taxpayers who had either not filed returns or had filed incorrect ones. “The analysis involves two aspects,the AI tools and the data they analyse,” he explained, noting that different tools are deployed at various stages, including at the Centralized Processing Centre in Bengaluru.
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He pointed out that while Annual Information Statements (AIS) are generated for 40 crore unique PAN holders, only around nine crore of them file income tax returns. One of the AI’s core tasks is to assess whether those who haven’t filed should have, based on transaction patterns and historical data. The system also scrutinises existing returns for accuracy and helps flag habitual defaulters.
The department uses this analysis as part of its NUDGE framework, or Non Intrusive Usage of Data to Guide and Enable, which involves sending advisory messages or letters to taxpayers, prompting them to either revise their returns or confirm their correctness. As a result of this approach, over one crore updated returns were filed since 2021-22.
The effectiveness of this strategy led the department to extend the timeframe for updating returns from two to four years. “If a discrepancy is being flagged, the taxpayer should have a window to make corrections within the statute,” Mr. Agrawal said.
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AI led interventions have also helped uncover undisclosed offshore wealth. In the financial year 2024 25, the department identified previously unreported foreign assets worth ₹29,000 crore and over ₹1,000 crore in foreign income linked to cryptocurrencies and virtual digital assets (VDAs), he said as reported by The Hindu.
In a recent campaign conducted between January and March, the department used similar AI based nudges to verify claims of political donations under Section 80GGC. SMS and email alerts were sent to 6.25 lakh taxpayers whose claims did not align with data from political party contribution reports submitted to the Election Commission. Around 35,260 taxpayers amended their returns, resulting in an additional ₹404.2 crore in tax.
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