E-Filing Is Easier, But Still Not Easy: Why India Needs An AI Tax Revolution

By Vibhore Goyal

Every July, over 70 million Indians fire up laptops, shuffle through Form 16 PDFs, and pray their passwords still work on labyrinthine government portals. The annual tax ritual has spawned a Rs 1,500 crore industry of CAs, DIY e-filing apps, and “tax made easy” call centres.

But before we pat ourselves on the back for digitising the chaos, it’s worth asking: Are we truly simplifying income tax for salaried Indians, or just making the pain a little less visible?

Consider the numbers. According to the Income Tax Department, over 7 crore returns were filed electronically in FY24, up from ~5 crore in FY19. The growth seems impressive, until you recall India has 12 crore employed professionals earning taxable income. That means over 40% of eligible taxpayers don’t file returns at all. This is not a minor gap, it represents a Rs 50,000 crore annual shortfall in formal income reporting and a significant missed opportunity for the banking sector to expand credit penetration and strengthen financial inclusion.

 Even among those who file, most returns are stuck in workflows optimised for box-ticking, not insight. Ask any professional: “I have no idea how my taxes are computed.” The average ITR takes 3–4 hours to assemble, despite most data, such as salary slips, bank interest, and mutual fund gains, already being in digital form somewhere.

This isn’t simplification. It’s digitised friction.

The Real Promise: Proactive, Invisible Tax Filing

It doesn’t have to be this way. Imagine an alternate future:

  • You get a notification: “Your draft return is ready. Reviewed for accuracy, optimised for deductions.”
  • You scan once, click approve, and move on with your life.
  • All relevant income, investment, and deduction data flows seamlessly from your employer’s payroll, your bank, and your investment platforms.

This is not utopian fantasy. In developed countries, 95% of tax returns are pre-filled and approved in under 5 minutes. In India, taxpayers still play detective, reconciling TDS certificates and scrutinising hundreds of lines in Form 26AS, and fearing a Rs 5,000 penalty if they miss a minor detail.

Compliance by Default, Not By Coercion

There is a deeper principle: technology shouldn’t just digitise compliance, it should embed compliance by default. When your salary is credited to a bank account, your TDS, professional tax, and deductions should cascade through APIs, pre-filling your return automatically. Instead of a fear-based approach (“File before 31 July or pay!”). We can adopt a trust-first approach: “We’ve done the work for you.”

Payroll Banking platforms now integrate the banking ecosystem, Account Aggregator frameworks, and HRMS systems to produce an “HR-GPT” experience for employees and employers. In this vision, reconciliations and proofs disappear into the background, replaced by effortless, error-free filing.

Why India Needs AI in E-Filing, Now

Some argue automation is a luxury in a country this large. But the data says otherwise:

  • India loses an estimated Rs 5,000 crore annually in productivity to manual tax filing.
  • Over 20 million man-days are wasted by employees and CAs collating proofs and reconciling records.
  • Non-compliance penalties, delayed refunds, and notices result in an additional Rs 1,500 crore in frictional losses every year.

AI can compress these costs dramatically. An intelligent system trained on payroll and banking transactions can reconcile records in seconds, auto-detect anomalies, and pre-validate deductions. The future of tax filing isn’t more humans behind screens; it’s cognitive AI behind the scenes.

Reimagining the Role of Employers

Here’s the provocative idea: What if employers were held responsible not just for TDS, but for auto-filing draft returns? They already control most of the relevant data, salary, reimbursements, and benefits.

If companies were accountable for error-free pre-filled returns, employees would be spared the annual paper chase, and compliance rates could cross 90%, adding over Rs 75,000 crore to the formal tax base annually.

Where Real Opporrunity Lies

Digitisation alone isn’t progress. If you take a broken process and make it paperless, you don’t get transformation, you get faster frustration.

The real opportunity is simpler, and bigger:

  • Treat taxpayers as customers, not suspects.
  • Move from optional e-filing to intelligent pre-filing.
  • Let AI become the invisible accountant, saving India Rs 6,500 crore a year in wasted effort and compliance costs.
  • Unlock a Rs 1 lakh crore opportunity by making tax compliance default, not optional.

E-filing has certainly become easier. But let’s be clear: it is still far from how easy it should be, and can be. We are only at the beginning of what true digitisation, automation, and AI will achieve.

(The author is the Founder of OneBanc)

Disclaimer: The opinions, beliefs, and views expressed by the various authors and forum participants on this website are personal and do not reflect the opinions, beliefs, and views of ABP Network Pvt. Ltd.

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