India's Income Tax Department to Raise Scrutiny Notices Using AI

The Indian Income Tax Department is poised to issue more scrutiny notices in the upcoming filing season, leveraging enhanced artificial‑intelligence and data‑matching capabilities. By cross‑checking returns against databases such as AIS, Form 26AS, TDS, GST filings, bank interest records and other government sources, the department can automatically flag mismatches in declared income, deductions or capital‑gain details. Errors as small as an omitted interest amount or an undocumented stock transaction may trigger a notice. Taxpayers faced with a notice could be asked for clarification, be subject to interest charges and, in some cases, penalties up to 50 % of the tax due. The new system also targets non‑resident Indians, capital‑gain omissions and dubious charitable deductions. Experts say the integration of multiple reporting mechanisms has made the department’s visibility into financial transactions far greater than in the past, allowing quicker detection of inconsistencies.