How the Income Tax Department used AI to collect over ₹11,000 crore

If you are planning to hide your income from the taxmen to pay less tax or increase your refund in the ongoing ITR filing season, be warned that you would most likely be caught, thanks to AI.

The Income Tax Department is using Artificial Intelligence-based processes to find out taxpayers who may not have correctly reported their income and filed taxes accordingly.

"By enhancing data accuracy, consistency and integrity, AI-enabled processes have been utilised to strengthen the analytics framework and support the selection of appropriate cases for outreach. This, in turn, facilitates fair, precise, and effective communication with taxpayers, thereby promoting voluntary compliance and reinforcing transparency in the tax administration system," Union Minister of Finance for State, Pankaj Chaudhary, told the Lok Sabha in a written reply on Monday, August 11, 2025.

"Filing of Updated Income Tax Returns in respect of Assessment years 2020-21 to 2024-25 has generated additional tax revenue of more than ₹11,000 Crore," he said.

What's happening

Foreign assets worth ₹29,000 crore revealed

The tax department has also used a 'NUDGE' campaign, making taxpayers to report their undisclosed foreign assets by filing belated ITRs. As a result of this campaign, over 5400 taxpayers filed belated returns, revealing foreign assets worth over ₹29,000 crore.

"Using Data Analytics, a NUDGE (Non-Intrusive Usage of Data to Guide and Enable) Taxpayers Campaign was launched by the Income Tax Department in November 2024 to improve taxpayers’ voluntary compliance for declaration of foreign income and assets.

"Under the campaign, informational messages were sent via SMS and email to selected resident taxpayers in respect of whom information has been received under the Automatic Exchange of Information that they are holding foreign assets and/or having income from foreign sources, to accurately report foreign assets and report income from foreign sources in their Income Tax Returns," he added.

According to the Finance Ministry, a total of 24,678 taxpayers reported their foreign assets and income in revised ITRs for AY 2024-25, while 5,483 taxpayers filed belated returns reporting foreign assets worth ₹29,208 crore and foreign income of ₹1,089.88 crore.