NEW DELHI– As the income tax filing season is in full swing, from salaried individuals to business owners, everyone is busy filing their Income Tax Returns (ITR). However, a major shift is underway within the Income Tax Department, which is now leveraging cutting-edge Artificial Intelligence (AI) and data analytics to scrutinize tax deduction claims. This aims to curb widespread misuse of popular deduction sections and dismantle networks promoting “guaranteed refunds” through illicit means.

The Income Tax Department’s adoption of AI is part of a broader strategy to uncover fraudulent activities, particularly those orchestrated by agents promising “guaranteed refunds.” Officials have highlighted the extensive misuse of various popular deduction sections, including House Rent Allowance (HRA) under Section 10(13A), donations under Section 80G, and interest on loans under various provisions of Section 80. The AI system is now verifying these claims against a multitude of data sources, including TDS (Tax Deducted at Source) data, bank records, and other comprehensive sources. This advanced system can instantly detect inconsistencies between income figures reported in ITR and those found in AIS (Annual Information Statement) and Form 26AS, flagging potential errors or fraudulent attempts.

Severe Penalties for False Claims

The consequences for taxpayers caught making false claims are severe. Under the Income Tax Act, providing incorrect information for deductions can lead to...

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