India’s tax administration may be on the verge of a major digital transformation. According to recent developments, the central government is preparing to roll out a fully automated tax filing and compliance system for large taxpayers, a move that could significantly reduce manual processes and human intervention in direct taxation.
This upcoming shift is expected to impact large corporations, multinational companies (MNCs), and foreign institutional investors (FIIs) the most. The initiative is part of the government’s broader push toward technology-driven governance and simplified compliance.
The government has already provided Application Programming Interface (API) access for the Goods and Services Tax (GST) system. Now, similar access is likely to be extended to direct taxes under the Central Board of Direct Taxes (CBDT).
Once API access becomes fully functional for income tax and customs, third-party consulting firms and technology providers will be able to develop AI-powered compliance tools. These tools can directly connect internal accounting systems of companies with government tax portals, enabling seamless data exchange.
Experts believe this step will drastically reduce the dependency on manual data entry, repetitive filings, and physical follow-ups.
Currently, even though most income tax returns are filed online, many compliance-related activities still require manual tracking. These include monitoring tax appeals, responding to notices, and following updates across multiple government portals.
With API-based integration:
Tax filings can be auto-generated
Compliance deadlines can be tracked automatically
Notices and alerts can flow directly into company systems
Errors caused by manual intervention can be minimized
This will save time, reduce compliance costs, and improve overall efficiency.
Industry specialists point out that Artificial Intelligence (AI) will play a crucial role once API access is granted. Consulting firms can combine government APIs with AI tools to create intelligent systems capable of:
Predicting compliance risks
Flagging discrepancies before notices are issued
Tracking appeals and tribunal cases in real time
Automating documentation and reporting
Such systems could transform tax departments from reactive units into proactive compliance centers.
The GST framework already demonstrates the benefits of API-based systems. Companies currently use GST APIs to:
Monitor MSME vendor status
Ensure compliance with 45-day payment rules
Automate vendor verification
Track customs-related obligations
Experts believe similar advantages can now be extended to direct taxes and customs, bringing uniformity across India’s tax ecosystem.
At present, taxpayers must manually visit tribunal websites, such as the Income Tax Appellate Tribunal (ITAT), to track the status of appeals. API integration can eliminate this inconvenience by pushing real-time updates directly into internal dashboards.
This will make dispute resolution more transparent and less time-consuming for businesses.
Leading consulting firms have welcomed the move. For instance, global consultancy PwC has already developed a technology solutions suite using GST APIs. According to experts, extending API access to direct taxes will expand the scope of such platforms significantly.
This could also encourage innovation in India’s tax-tech ecosystem.
While the finance ministry has not issued an official confirmation yet, industry insiders believe the transition toward automated tax compliance is inevitable. If implemented smoothly, this system could redefine how large taxpayers interact with the income tax department.
For businesses, the message is clear: prepare for a future where technology, not paperwork, drives tax compliance.
Disclaimer: This article is for informational purposes only. Tax laws and policies are subject to change. Businesses and taxpayers should consult qualified professionals before making compliance-related decisions.
