AI enhancing tax fraud detection in India, says Nandan Nilekani

Infosys co-founder and non-executive chairman Nandan Nilekani

Artificial Intelligence (AI) is already being used to detect fraudulent activities within India’s Income Tax as well as rhe Goods and Services Tax (GST) system, Infosys co-founder and non-executive chairman Nandan Nilekani said on February 21.

Speaking at the All India Management Association’s (AIMA) 69th Foundation Day & 19th National Management Day event, Nilekani said AI-driven mechanisms are now strengthening tax administration and helping prevent fraud.

"AI is already used in income tax, GST to catch fraud," Nilekani said during the fireside chat with Moneycontrol’s Managing Editor Nalin Mehta, referring to efforts to leverage AI in tax enforcement.

Government has been employing AI to analyse vast data sets, detect anomalies, and flag potential cases of tax evasion. AI-driven systems have been used to scrutinise GST registrations and prevent fraudulent claims for input tax credits. This has helped authorities differentiate between legitimate taxpayers and fraudulent entities more effectively.

By leveraging machine learning models, tax authorities can assess tax filings, predict potential non-compliance, and automate risk-based audits, thereby reducing manual interventions.

Nilekani also emphasised the need for simplifying tax laws to enhance ease of doing business in India. "The new Income Tax Act is a big step forward because there is a lot of simplification. For ease of doing business, we need to make all these laws very simple," Nilekani said.

On India’s long-term economic prospects, Nilekani said if the nation continues to implement the right reforms, it could achieve sustained GDP growth. "In the long term, if India does everything right, it can get to 6-8 percent growth compounded."

India’s economic growth trajectory remains strong, with the International Monetary Fund (IMF) forecasting a GDP expansion of 6.5 percent in both 2025 and 2026. As AI adoption in taxation deepens, it is expected to contribute to revenue optimisation and improved compliance, supporting India's broader economic ambitions.