Income Tax Department Uses AI to Recover Over ₹11,000 Crore in Four Years

New Delhi — If you think you can hide your income to pay less tax or get a bigger refund, think again. The Income Tax Department is now using Artificial Intelligence (AI) to spot taxpayers who don’t report their income correctly, and it’s already brought in a huge amount of extra revenue.

In the last four years, AI-based tools have helped the department collect more than ₹11,000 crore in additional taxes. This was done by identifying taxpayers who had underreported their income and then getting them to file an Updated Return (ITR-U).

Minister of State for Finance Pankaj Chaudhary told the Lok Sabha on Monday, August 11, that AI has made it easier for the department to work with accurate and consistent data. This has helped in selecting the right cases for follow-up and in making communication with taxpayers more targeted and effective. “By enhancing data accuracy, consistency and integrity, AI-enabled processes have strengthened our analytics framework, promoted voluntary compliance, and reinforced transparency in the tax system,” he said.

The minister explained that filing of Updated Returns for assessment years 2020-21 to 2024-25 alone has generated over ₹11,000 crore in extra revenue.

Apart from AI, the department has also used a special outreach effort called the ‘NUDGE’ campaign. Launched in November 2024, it focuses on taxpayers who does not declared their foreign assets or income. Using data shared under the Automatic Exchange of Information agreement with other countries, the department has sent SMS and email alerts to selected people that reminds them to disclose any such assets in their returns.

The results were significant. Over 5,400 taxpayers filed belated returns revealing foreign assets worth more than ₹29,000 crore and foreign income of about ₹1,090 crore. For the assessment year 2024-25 itself, a total of 24,678 taxpayers reported foreign assets and income in revised form.

Officials say this method uses technology and friendly reminders to get people to follow tax rules without heavy-handed action. With AI and targeted messages, the department has been able to spot hidden income, help taxpayers fix their returns, and bring in money that might have been missed.

The government also believed that if Ai technology continues to work and improve in future it will become even harder for the taxpayers to hide any kind of income or assets be it in India or abroad.