Tax Digitalization Gains Momentum

The momentum towards tax digitalization has led to the ease of doing business, enhanced efficiencies, and reduced time spent on compliance for taxpayers. This is one of the findings of the second edition of Deloitte India’s Income Tax Digitalisation in India survey.

“India is undergoing a significant transformation in tax digitalization, with the government’s strong push towards innovation and a taxpayer-friendly ecosystem,” the survey said. It revealed that India Inc has shown a positive perception towards tax technology and significant trust in the government’s digital initiatives.

As taxpayers increasingly value digital advancements, the shift toward paperless, tech-enabled services has created a new benchmark for efficiency and ease of doing business. Deloitte India’s Income tax digitalisation 2.0 survey captured insights into taxpayer expectations for the adoption of advanced technologies, like AI and blockchain, to further modernise tax processes, Deloitte India said.

Driven by the tax administration’s digital tax initiatives, nearly four-fifths of all businesses are adopting technology for internal tax processes to minimize risks and efficiency. Digital tax administration has significantly increased the use of tax technology, with 95 per cent of respondents from very large organizations reporting very significant or significant use of tax technology.

The government’s e-initiatives have eased communication between taxpayers and the tax department, with 87 per cent of respondents acknowledging the positive impact of reduced manual communication/efforts and bringing efficiencies.

There has been a significant jump in the proportion of organizations transforming their tax function into a technology-driven tax function.

In 2023, 21 per cent of respondents believed it would take more than five years for their tax function to be technology-driven; this percentage has dipped sharply to only 8 percent in this survey. This shows a clear shift in the mindset of tax and finance professionals.

While larger organizations are expected to adopt technology rapidly, small organizations have also charted paths, with 81 per cent looking for a technology-driven tax function in the next five years, the survey said.