Income Tax AI Tracking 2025 Flags PAN Irregularities

Income Tax AI Tracking 2025: The Income Tax Department is taking a significant technology-driven approach to bolster tax compliance, relying on artificial intelligence (AI) to assess taxpayer behavior and decide on actions when it sees anomalous patterns. By monitoring access to its online portal and identifying PANs involved in invalid claims, the department essentially builds an in-depth digital persona of taxpayers to ensure their tax return is accurate.

This effort is an extension of various projects to enhance return filing and to decrease invalid exemptions and deductions, according to Central Board of Direct Taxes (CBDT) Chairman Ravi Agrawal in his recent speech.

AI-Induced Monitoring to Improve Compliance

The department is extending its assessment of taxpayer compliance by monitoring its online port, looking in particular at how often taxpayers look at their Annual Information Statement (AIS) – which is a pre-filling display of income and financial transaction.

“If an individual looks at their AIS many times without submitting a return, that suggests they may need assistance or they are purposely avoiding compliance,” Agrawal said. The system can now see this behavior and initiates targeted messaging to help facilitate taxpayer compliance.

This is part of a more comprehensive endeavour to use AI to create a composite picture of the taxpayer in order to identify anomalies and provide timely assistance.

Data-Driven Insights Reveal Serious Disparities

The Income Tax Department has an enormous amount of data; over 40 crore AIS records produced from over 650 crore financial transactions in the last fiscal year alone. The Department saw only 9 crore returns, even if 7.42 crore taxpayers viewed their AIS records on average of 3.5 times.

Agrawal said, “These stats show that there is a lot of opportunity for improvement. There is a big difference between data awareness, or surveillance if you will, and the actual submissions of returns.” These analytics are already giving the Department direction to undertake proactive outreach, helping to also close some of this wide disparity.

National Sweep Against Fraudulent Claims

In a major operation, the Department commenced a national verification operation on July 14 at 150 locations, discovering over 150,000 PANs linked to abuses on claims of refunds. The operation was focused on professionals and intermediaries who mislead taxpayers to claim false deductions or exemptions.

Agrawal said, “This measure is not for honest taxpayers, and we should focus on the ones who facilitate improper behaviour. False claims damage our tax credibility and should be unnecessary.”

Foreign Holdings, Exceptions in Review

The Income Tax Department is now using data from global information exchanges. 19,501 taxpayers were stimulated to amend their filings through automated exchange systems, where the results were – a 62% compliance and foreign assets reported as ₹29,208 crore and foreign income as ₹1,089 crore.

The effort to correct excessive claims under section 80GGC has also been fruitful. Erroneous claims of ₹9,000 crore were detected, along with an additional ₹409.50 crore of tax collected on the corrections. These figures confirm our belief that data nudges work for the betterment of compliance.

Tough Nudges and Communication Issues

The department is also seeing the incidence of repeated mistakes in filings, and this may require “tougher nudges” – tougher reminders or even examinations. “We desire to only inform people not punish,” Agrawal stated. “But severe non-compliance will cause more serious consequences.”

Yet a continuous obstacle, frequented use of intermediaries or temporary email addresses, limits our ability to directly communicate with taxpayers. This slows down the action process and undermines the value of the digital space.

“We encourage taxpayers to update their individual contact information as we depend on it to provide accurate and timely services”, Agrawal said, indicating that effective communication relies on extensive digital communications.

Effects of AI Integration

Artificial Intelligence plays an essential role in uncovering signals of risk exchange in the tax ecosystem. Be it extraordinary actions in the filing of transactions, pattern of errors or an inconsistency between the data sourced from the AIS and the tax return filed, the system now makes adjustments and moves forward to accelerate target efforts that are faster and more targeted.

As of June 18, 2025, over 89 lakh ITRs have been revised leading to an additional tax revenue of ₹9,577 crore. This increase indicates the potential technology-fueled nudge towards voluntary compliance.

AI is modernizing how the Income Tax Department of India engages to increase tax compliance while decreasing disregard for non-compliance with tax laws. Though there is an evident shift to support and correction rather than punishment, there are drastic consequences for repeated error.

For those of you who follow latest news business, this illustrates a move toward accountability and transparency, data-fueled, technology-driven and a positive outcome for the country’s tax framework.