The strategy of using ‘Non-intrusive Usage of Data to Guide and Enable taxpayers’ or NUDGE has yielded significant results with over 30 taxpayers declaring foreign assets, false claim of deduction of around ₹1,000 crore to political parties reducing and more and more people updating their returns, said Ravi Agrawal, Chairman of the Central Board of Direct Taxes. On the occasion of the Income Tax Day on July 24, he assured assessees that experience of return filing this year would be much better. Edited excerpts:
How has CBDT leveraged data analytics and AI to identify and prevent tax evasion, and what successes have been achieved so far?
. Our systems create a 360-degree profile of taxpayers’ financial transactions and flag any inconsistencies between their declared income and financial activities. The in-house ‘Project INSIGHT, uses advanced data analytics to collate information from various sources, including bank reports, financial institutions, sub-registrars of properties etc. This enables us to identify high-risk cases of potential tax evasion without intrusive manual interventions. Through a non-intrusive approach, the Department was able to bring a significant number of these individuals into the tax fold.
The Department proactively nudges taxpayers suspected of making wrong claims or omissions to update their returns and pay the correct tax. The success of this approach is visible in the outcome of the ‘NUDGE’ campaigns. For example, based on automatic exchange of information NUDGE campaign for foreign income and assets, communication sent to 19,501 taxpayers, out of which 62 per cent revised their returns, and a total of 30,161 taxpayers declared foreign assets worth ₹29,208 crore and foreign income of ₹1,089 crore during the campaign period. Similarly, in matters related with false claims under Section 80GGC, data analytics identified over ₹9,000 crore in excess deductions claimed under Section 80GGC.
Nudging taxpayers through SMS and emails led to a reduction of ₹963 crore in deductions and the payment of ₹409.50 crore in additional taxes as of June 18, 2025. The updated return facility (ITR-U), which is utilised after nudges, has seen significant success. As of June 18, 2025, a total of 88,92,395 updated ITRs have been filed, generating ₹9,577.06 crores in additional taxes. Overall, over 1.1 crore updated returns have been filed, collecting more than ₹11,000 crore. By proactively providing taxpayers with information about their financial transactions, we encourage voluntary compliance.
What are CBDT’s plans for further leveraging technology to improve tax administration and taxpayer services, and are there any upcoming initiatives or reforms that taxpayers can expect in the near future?
Going forward, we plan to further harness the power of AI and machine learning to enhance our risk-assessment capabilities and further improve the taxpayer experience.
There are some apprehensions related with enhancing digital surveillance power under new IT Bill. There are also some fears around data privacy among taxpayers. What measures are in place to ensure the security and privacy of taxpayer data in the new return filing system, and how is CBDT addressing potential cybersecurity risks?
The Department does not engage in intrusive surveillance of citizens’ activities. The new Income Tax Bill, 2025 only re-states and makes explicit the powers already implicit in the Income-tax Act 1961 u/s 132. It is important to understand that these provisions are strictly applicable only during search and survey operations. They are not meant to breach the online privacy of common taxpayers, even if their case is under scrutiny. These powers are only executed when an assessee being searched or surveyed refuses to share passwords for digital storage drives, emails, clouds and communication platforms. These powers have always existed and are merely being updated to reflect the digital age.
Clause 247 of the new Bill, which allows overriding access codes, is a modernisation of these existing provisions. With financial activities increasingly moving online, including digital banking, cryptocurrency and cloud storage, these powers are intended to combat sophisticated methods of tax evasion that utilise internet-based tools and technology. Our data collection and analysis are strictly for the purpose of tax administration and governed by the provisions of the Income Tax Act, 1961. There are robust internal controls and access restrictions. The faceless nature of our key processes, such as assessments and appeals, introduces another layer of anonymity that acts as a significant safeguard against selective targeting.
Are the risk rules for Computer Aided Scrutiny Selection (CASS) dynamic? How does the Department ensure that the scrutiny system continuously evolves and adapts to new methods of tax evasion?
The risk rules for Computer Aided Scrutiny Selection (CASS) are dynamic and are continuously refined based on and feedback from the field formations that carry out the assessment process. This ensures that our scrutiny system adapts to new challenges. The emerging areas of income generation and value creation in the economy and new modes of attempted tax evasion are also closely studied, and the risk-parameters are accordingly updated.
Given the immense sensitivity of the financial data at the disposal of the Department, what specific measures are in place to ensure it doesn’t cross into intrusive surveillance of citizens’ activities?
We categorically do not engage in intrusive surveillance of individuals or their personal activities. Identity-blind Rule based algorithms are used for risk assessment. Access to taxpayer data is strictly controlled and monitored. To uphold the confidentiality and integrity of taxpayer information, stringent internal controls have been instituted. Our commitment to impartiality is reflected in the faceless nature of core procedures such as assessments and appeals.
The IT portal has experienced technical issues in the past . How stable is it now and is it now geared to meet the increased demand?
The system has demonstrated its capability to handle high volumes, processing over 7.28 crore Income Tax Returns (ITRs) by July 31, 2024, which was a new record (7.5 per cent higher than the preceding year). On July 31, 2024, alone, 69.92 lakh ITRs were filed, and 3.2 crore successful logins. were recorded. The average ITR processing time has been drastically reduced to 17 days in FY 2024-25. Now, with dates extended this year till September 15, and filing for ITR 1, 2 and 4 have already begun, and with proven better capacity we feel there should not be any problem.
