The Income Tax Department is stepping up its game, using Artificial Intelligence (AI) to keep a closer eye on taxpayers. They’re building detailed profiles by tracking your online activity, like how often you check your Annual Information Statement (AIS), and flagging high-value transactions that don’t match your tax returns.
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AI has already revealed some significant issues, including a staggering ₹9,000 crore in excess deductions claimed under Section 80GGC. The department also noted a large gap between the 40 crore AIS statements generated last year and the mere 9 crore tax returns filed, suggesting many potential filers are falling short.
To tackle this, the department launched a verification sweep on July 14, 2025, across 150 cities, focusing on over 1.5 lakh PANs linked to suspicious claims. CBDT Chairman Ravi Agrawal clarified these actions are primarily aimed at “intermediaries or facilitators – professionals misguiding filers,” rather than directly at taxpayers.
“Nudging” for Compliance and Boosting Revenue
Beyond enforcement, the department is using AI to “nudge” taxpayers towards compliance through SMS and email campaigns. This approach has been quite effective: for instance, after being nudged about foreign asset disclosures, 62% of 19,501 taxpayers revised their returns, leading to declarations of ₹29,208 crore in foreign assets and ₹1,089 crore in income. A targeted SMS/email campaign specifically for Section 80GGC deductions also helped recover ₹409.5 crore.
These efforts are clearly paying off. As of June 18, 2025, the department has collected an additional ₹9,577 crore in taxes from 89 lakh updated returns. Overall, updated returns have generated ₹11,000 crore in additional tax revenue over the last four years.
The Road Ahead: Correct Contact Details Are Key
Despite these advancements, a basic issue remains: faulty contact information. Many taxpayers register emails or phone numbers belonging to intermediaries, making direct communication and effective “nudging” difficult. The department emphasizes that while they “trust taxpayers,” incorrect claims are simply not acceptable.
It’s clear the Income Tax Department is leveraging technology to create a more transparent and compliant tax ecosystem. Make sure your contact details are updated to receive important communications directly from them!
