Analytics and technology are transforming India’s financial officials

Sweeping technology-driven changes in tax administration for businesses and individuals are unfolding with services like never before.

Voluntary tax honesty is the buzzword. The tax professional’s use of technology and skill is the quiet change. The system and data driven tax regime is unfolding the new way of tax compliance in India.

The four big themes were the pillars of the quiet change brewing with the tax administration. A very scalable platform is now ready, allowing for the launch of multiple new services over an extended period of time. First of all, a payment system is already working, connecting the platform with banks and financial institutions to facilitate transactions. Mobile-driven responses to AIS, mobile apps for convenience, use of e-filing and other new services are in the works.

Over time, more and more new services will be introduced on the new platform. The changes will be geared towards providing real-time services while keeping taxpayers’ needs in mind. Imagine millions of individuals and thousands of businesses using hundreds of these services.

The way in which information is collected by the tax administration is undergoing a fundamental change. As the network expands with additional sources for the TDS and TCS deductions, more data is also available. A data sharing agreement – automatically and upon request – with GST, CBIC and other similar entities complements the enhanced data sources. The taxpayer can also expect the consent-based exchange of data from his tax return. Approval can be given to specific entities for loans or other services. With these information management processes, the tax office tries to simplify compliance management for companies.

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As part of an effort to encourage voluntary compliance, the sources from which the data is collected are shared with the taxpayer. It started with pre-filling returns, but now the bar is being raised. Well before the declarations are filed, any discrepancy can be viewed in the AIS/TIS and a response can be filed with the Inland Revenue. This allows the changed value to be used to pre-fill the AIS/TIS.

With 100 percent electronic records being the order of the day, all information submitted by the taxpayer is always available with the Payroll Department. When an investigation is conducted, the electronic records are available for it. This allows for specialization, data analysis, knowledge management around legal issues or a case that requires a physical verification – all these areas can be used in the future. This is changing the way assessments and appeals are conducted.

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With the widespread use of technology and analytics, how can companies keep up with their compliance requirements? Once the basic technological framework is in place, the tax officer suggests that businesses should keep a regular eye on the AIS well in advance of the tax return filing date. Feedback on data sources or duplication of data helps correct at source and reduces the likelihood that reconciliation will be required.

It’s time for the tax department and taxpaying companies and individuals to work closely together. Technology has helped the tax administration take its steps. Improved voluntary compliance could be worth the effort.

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As the tax official talks about the changes, EY conducted a poll titled “Redesigning the tax and finance function.” In its fourth year, it featured responses from over 140 companies across over 20 industries. 85% wanted to overhaul their tax role, while over 50% responded that they didn’t have the ideal tax role. A whopping 84% believe workloads will increase with recent legislative changes, and 95% expect an increased workload as government uses targeted data. 80% of respondents said they expect their tax risk profile to increase.

Disclaimer: Content produced by The Economic Times Gray Cell

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