CBDT to intensify AI-powered crackdown on tax evasion ahead of new I-T Law: Report

A recent compliance campaign prompted taxpayers to withdraw Rs 963 crore worth of wrongful deduction claims and pay Rs 409.50 crore in extra taxes between April 2023 and mid-June 2025

The Central Board of Direct Taxes (CBDT) plans to ramp up efforts to curb tax evasion by leveraging advanced data analytics and artificial intelligence, chairman Ravi Agrawal told the Economic Times. This push comes as the new income tax law is expected to be passed in the current session of Parliament, the ET report said in Thursday.

With insights from over 6.5 billion domestic digital transactions and international data-sharing arrangements, the Income Tax Department is now better equipped to spot inconsistencies in reported income, Agrawal said in an interview.

He clarified that the department's powers to access digital records are only invoked in specific cases—namely, search and seizure operations involving uncooperative taxpayers—and are not intended to intrude on the privacy of compliant citizens.

“The upcoming phase of AI integration will be deeper,” Agrawal noted. “We are now getting higher quality data from reporting entities, allowing us to run more targeted analytics and detect evasion with greater accuracy.”

To encourage voluntary compliance, the department has been proactively sharing financial transaction data with taxpayers. Since the launch of this initiative in April 2022, over 11 million updated returns have been filed, contributing an additional Rs 11,000 crore in tax collections.

A recent compliance campaign prompted taxpayers to withdraw Rs 963 crore worth of wrongful deduction claims and pay Rs 409.50 crore in extra taxes between April 2023 and mid-June 2025. In the same period, 30,161 individuals disclosed Rs 29,208 crore in foreign assets and Rs 1,089 crore in overseas income.

“This outcome was driven by data analytics,” said Agrawal, adding that it enabled a nationwide compliance operation. A similar data-driven campaign is expected to roll out this year using newly acquired datasets.

He emphasised that the quality of information received from foreign agencies under tax exchange agreements has notably improved. “They now understand our information needs better, which is helping us trace foreign asset holders,” he said. Efforts are also underway to monitor newer risk areas like cryptocurrencies, the dark web, and other emerging transaction methods.

India, Agrawal added, is playing a significant role in shaping global norms under the Crypto-Asset Reporting Framework. “Our voice is being acknowledged in international discussions, and we’re already aligned with regulatory frameworks that support information exchange,” he said.

Digital Push Expands Tax Base and Boosts Efficiency

Agrawal also credited digitisation for expanding the country’s taxpayer base—from 30 million in FY14 to 90 million in FY25. At the same time, gross refunds have grown nearly fivefold, from Rs 83,008 crore in FY14 to Rs 4.76 lakh crore in FY25. The average processing time for refunds has reduced drastically, now taking just 17 days compared to 93 days a decade ago.

About 22% of income tax returns are now processed within a single day, while 26% are completed in two to seven days. The department is processing around 6.5 billion transactions annually to generate pre-filled returns for approximately 400 million taxpayers. Remarkably, 99% of them find the pre-filled data accurate.

“We must recognise the extensive backend effort that goes into pre-populating ITRs—it’s helping nudge taxpayers towards compliance,” he said.

Preparing for the New Tax Law

With the Parliamentary select committee submitting its report on the new income tax bill, Agrawal said the department's real task begins now. “Passing the bill is just the beginning. It will be followed by framing of rules, designing new forms, and building institutional capacity,” he said.

This marks a significant transition for both the tax department and taxpayers, as preparations begin for the implementation of the new law, scheduled to take effect from April 1, 2026.