FROM TRACKING the number of online visits of users on its portal to flagging high-value transactions and filtering out PANs involved in wrongful claims, the Income Tax Department is now leveraging artificial intelligence to identify patterns in taxpayer behaviour.For instance, repeated online access to Annual Information Statement, which is a detailed summary of a pre-filled Income Tax Return, could point to a tax return that needs to be filed, but is not being filed. Or, it is just possible that the taxpayer is unable to file returns correctly despite multiple attempts. The I-T Department can use this information to intervene and help the taxpayer.The idea is to progressively create a 360-degree profile of taxpayers’ transactions and identify patterns and nuances in the filing of tax returns, said Central Board of Direct Taxes (CBDT) Chairman Ravi Agrawal in an interview to The Indian Express.The department is a repository of rich data — as many as 40 crore AIS were generated from an estimated 650 crore financial transactions in the last financial year. Based on AI-linked data analysis, the Department is of the view there is scope for improvement in the total number of returns being filed.While nine crore returns were filed by taxpayers last year, about 7.42 crore taxpayers are recorded as having viewed their AIS, returning as many as 3.5 times on an average to see their statements.AI is also helping raise “red flags” in high-value transactions, but where returns are not being filed or the taxpayers are repeatedly committing a mistake in filing tax returns, prompting the Department to consider whether the taxpayer requires a “harder nudge”, Agrawal said. The use of AI has also shown that there were gaps, and sometimes offered pointers to cases where the deductions and the exemptions that were claimed were not correct.“On an average, taxpayers visited about 3.5 times to see their AIS. This means the visits to see their AIS, in aggregate, was 24 crore times. This becomes a reference point for the taxpayer to see their ledger and take a call on what tax is to be paid and whether advance tax has to be paid or not. This means there is a wide acceptance of the information and the ledger in the form of AIS. 9 crore people are filing the returns, and you have more than about 40 crore AIS. So, there is a scope for further increase in the number of returns. On an average, taxpayers visited about three and a half times to see their AIS. That means the visits to see their AIS, in aggregate, was 24 crore times,” Agrawal said.Story continues below this adThe Income Tax Department has been taking measures for taxpayers to file returns correctly. In this direction, the Department on July 14 had initiated a large-scale verification operation across 150 locations in the country, targeting individuals and entities facilitating fraudulent claims of deductions and exemptions in ITRs that has resulted in identification of over 1.5 lakh PANs . “This was basically an exercise in that direction. The taxpayer reports certain income, and while calculating their income, reports certain exemptions or deductions which are taken on face value and the system processes. But what we found through AI was that there were gaps, and they were really patterns that emerged, which reflected that the deductions and the exemptions that were claimed were not the correct deductions/exemptions. So, therefore, our pan-India exercise was undertaken to also flag and bring home the point that while we trust the taxpayer, but then at the same time, incorrect claims of deductions and exemptions is not acceptable,” he said.The CBDT Chairman said these actions were not specifically against the taxpayers but against the intermediaries or the facilitators who are misguiding the taxpayers. “Those could be professionals or intermediaries. Through those, more than 1.5 lakh PANs have been identified. The exercise is still going on,” he said.For filing updated returns, 19,501 taxpayers were nudged based on data received under automatic exchange of information, which resulted in 62 per cent of them revising their returns and a total of 30,161 taxpayers declared foreign assets worth Rs 29,208 crore and foreign income of Rs 1,089 crore. Over Rs 9,000 crore were also identified to have been claimed in excess deductions under Section 80GGC. Nudging taxpayers through SMS and emails led to a reduction of Rs 963 crore in deductions and payment of Rs 409.50 crore in additional taxes as of June 18. Around 89 lakh updated ITRs have also been filed, generating Rs 9,577.06 crore in additional taxes as of June 18, 2025.The data analysis has led the department to flag gaps by sending mails to taxpayers. “Whatever coordinates you have, you can inform. The second component is whosoever is filing the return, whether a correct return has been filed or not. In case, there is an obvious gap or something which needs to be flagged and from the taxpayer nudge him towards better compliance, and right compliance. And the third component is: if you find that the taxpayer is repeatedly committing a mistake, can there be a case of a harder nudge?” he said.Story continues below this adHowever, the department is facing a roadblock as the email addresses provided for communications are turning out to be those of intermediaries or temporary. “Since it is an end-to-end, e-enabled service that the Tax Department is providing, unless the taxpayer gives us the right coordinates of email and mobile, it becomes really very difficult for the department to correspond with the taxpayer,” he said.