Importance of Timely Income Tax Filing and the Implementation of AI in Tax Scrutiny

The Importance of Timely Income Tax Filing and the Implementation of AI in Tax Scrutiny

Did you know that timely filing of income tax returns can save you from penalties and unnecessary stress? July 31st is the last date for filing Income Tax returns without any penalty for Assessment Year 2023-24. This year, there has been a positive trend with over 2 crore ITRs filed by July 11th, compared to the same period last year. This indicates that more taxpayers are proactively filing their returns before the deadline. With around 6 crore taxpayers in India, this is definitely encouraging news.

The Income Tax Department has recognized the importance of early filing and has taken steps to streamline the process. Leveraging the advancements in technology, they have integrated Artificial Intelligence (AI) to enhance the scrutiny of tax returns. This move ensures efficient and accurate evaluation of income tax returns (ITRs), benefiting both the taxpayers and the tax authorities.

Through AI, the program analyzes data linked to your PAN card, Aadhaar card, and bank accounts. It cross-references transactions associated with your Aadhaar and PAN with your linked bank accounts, compiling comprehensive information on fixed deposits, interest credits, dividends, share transactions, mutual fund investments, and more. The AI system also searches for undisclosed bank accounts, joint accounts where you are listed as the second or third holder, postal accounts, bank accounts with cooperative banks, local credit institutions, and various financial instruments.

Furthermore, the program verifies PAN card details against government registries to identify any land or immovable property transactions. It scrutinizes debit card and credit card transactions, passport and visa details, and even information related to the purchase or sale of vehicles. The AI system effectively analyzes all this data and automatically calculates both declared and undeclared taxable income.

One significant impact of this AI system is the scrutiny of fake donation claims. In the past, taxpayers would put forward false donation details to avail tax rebates, taking advantage of the lack of data verification capabilities. However, with the deployment of a robust AI-powered program, the Income Tax Department can now cross-verify donation claims easily. This has resulted in the issuance of hundreds of notices between March 20th and June 10th to taxpayers who made fraudulent donation claims. The effectiveness of the new AI system is evident in its ability to differentiate between genuine and fake donation claims.

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