AI-Driven Tax Governance in India:
India is increasingly using Artificial Intelligence (AI) in tax administration, especially through the Income Tax Department’s Project Insight (PI).
- While AI has improved tax compliance and revenue mobilisation, concerns around privacy, bias, and accountability are emerging.
- Project Insight (PI) is an initiative of the Income Tax Department (ITD) launched in 2017 (operational from 2019) to use Artificial Intelligence (AI) and data analytics for strengthening tax administration.
- It creates a 360-degree financial profile of taxpayers by analysing data from sources like banking, GST, property, and high-value transactions.
- It aims to detect tax evasion, improve voluntary compliance, and ensure fair and efficient tax enforcement, with three interlocking components.
- The Income Tax Transaction Analysis Centre (INTRAC) is the core analytical engine.
- It pulls financial data from banks, property transactions, credit card records, GST payments, and cryptocurrency holdings to build a comprehensive financial picture of each taxpayer.
- The Compliance Management Centralized Processing Centre (CMCPC) uses INTRAC’s outputs to identify discrepancies and flag likely cases of under-reporting.
- Non-intrusive Usage of Data to Guide and Enable (NUDGE) sends SMS and email reminders to taxpayers whose declared income doesn’t match their detected financial activity, prompting them to voluntarily revise their returns or explain their filings.
