How Income Tax Department is using AI to find evaders
Artificial intelligence (AI) tools are the talk of the town. It is tough to find someone who is yet to board the AI bandwagon these days. AI's ever-increasing influence can be felt in various spheres of our lives. Even India's Income Tax Department is depending on AI to get an upper hand over tax evaders. Let's see how that works.
Why does this story matter?
AI might have several flaws, but one thing it is good at is pattern recognition. This ability of AI is invaluable when it comes to taxation. After all, taxation is nothing but numbers presented in different ways. AI can easily analyze large sets of data and find patterns of suspicious activity. This makes it a useful tool against tax evaders.
IT Department sent notices to multiple salaried individuals
According to Moneycontrol, the IT Department has issued notices to multiple salaried individuals from March 20 to June 10 this year. These notices were issued on the basis of reassessments conducted on several income tax returns. The department has been especially focusing on deductions claimed for donations made to political parties and charitable trusts during FY19.
Some notices called for a reassessment
Under Section 80G of the Income Tax Act, 1961, taxpayers can claim deductions of 50-100% for donations to charitable organizations and political parties. The IT Department has now sent notices under Sections 138 and 148 (A) to hundreds of individuals that claimed deductions under Section 80G. Some of them pointed out erroneous deductions, while others were reassessment notices.
AI found discrepancies in deductions claimed
The IT Department used AI to find the discrepancies related to deductions claimed under Section 80G. The ability of AI to detect patterns is what helped the department. It identified people whose donations against income earned are skewed for FY19. Some people claimed a higher donation value to increase the deduction. Most notices were reportedly sent to individuals in Gujarat.
Individuals have to pay penalty if they can't prove donations
Individuals have to respond to the notice. If they have proof of the donation, they can produce that in the response. Else, they will have to pay the tax they owe along with the penalty mentioned in the notice. They will have to pay a 50-200% penalty if they cannot prove the transaction is genuine.
