Income-tax digitalisation in India

• The improved income-tax portal received the highest ranking across corporates for its user-friendly interface and e-documentation trail maintenance.
• About 86 percent of the respondents have reported active adoption of digital/automated tools within their tax functions, thereby automating transactional taxes, annual compliance, and data reconciliations.
• About 74 percent of the respondents are utilising specially configured ERPs for tax compliance.

New Delhi, 9 May 2023: Seeking to become equal stakeholders in the government’s digitalisation drive and simplification of the taxation ecosystem, India Inc. is gearing up by integrating technology, accelerating investments, and developing talent in the new age of the contactless tax regime.

To assess the affects of the government’s technology-backed paperless, cashless, and faceless regime, Deloitte India released a survey titled ‘Income-Tax digitalisation in India,’ which highlights insights on industry acceptance and preparedness for the ever-changing tax landscape.

According to the findings, the improved income-tax portal emerged as one of the most effective digital tax administration initiatives, based on its user-friendly interface and e-documentation trail maintenance. The others included computer-based scrutiny selection, speedy processing of returns and refunds, along with faceless assessments.

The findings indicated 92 percent of businesses with a turnover of more than INR 6,400 crore have significantly increased the usage of tax technology and 65 percent of the respondents have already started witnessing a substantial change in their business operations through the adoption of digital tax initiatives. About 85 percent of the respondents plan to transform their tax operations into a technology-driven function over the next five years. About 67 percent of the companies have already increased their budget for tax transformation and automation.

Rohinton Sidhwa, Partner, Deloitte India, comments on the technology transformation, “Technology in tax has progressed from spreadsheets to basic TDS, and income tax return tools have since evolved to the point where various solutions are available, such as tools for litigation management, tax compliance trackers, TDS data reconciliations, data extractions from ERP, tax provisioning tools, tax audit report tools, etc. Coupled with this market trend of solutions, organisations are also adopting specific and customised automation, including implementing tax-sensitised ERPs. It is encouraging to note that 60 percent of companies have already completed automation for transaction tax and annual tax compliance, with the remaining 40 percent still in the process. We also noted that 50 percent of the respondents attested to the advantages of data accessibility on tax portals while observing a notable decrease in time spent on compliance.”

The results show a rise in the utilisation of specially configured ERPs for tax compliance, especially in companies that have a turnover of more than INR 3,000 crore. This will only increase in the coming year as more organisations opt for tax-sensitised ERPs to resolve the challenges around data collation and reconciliation, and to enable efficient tax reporting.

Sidhwa further adds, “While the adoption of digital governance has led to parallel evolution of the stakeholders, platforms themselves must be consistent in their functioning and availability. Businesses must also be future facing to extract the best out of the system, as the transformation has already begun and tax functions must therefore put their best foot forward to embrace this digital change.”

There have been continued efforts from the tax administration to accelerate technology adoption to meet compliance requirements and free up some time for taxpayers. About 79 percent of the survey respondents believe that their internal tax functions will be driven by technology in the next five years. However, there is still a need to change the existing mindset regarding technology integration, increase budgets for smaller organisations, and develop skilled talent to expedite the transformation journey.

Objectives and methodology:

Income Tax digitalisation in India 2023 survey was conducted by Deloitte Touche Tohmatsu India LLP (DTTILLP). It delves into the following:
• Understand the industry’s outlook on various technology initiatives of the Central Board of Direct Taxes/Income Tax Department.
• Assess the impact, challenges, and preparedness of organisations for digital tax administration.
• Identify the areas where organisations believe technology/automation in tax would be useful.
• Create a vision for tax in the future.

The survey has responses from 129 tax professionals including c-suite, directors, and presidents from finance functions, general manager (finance), and vice president (finance), finance & taxation managers. Further, it tracks the affects of technology across the tax sector, including consumer; energy resources and industries; financial services; government and public services; life science and health care; and technology, media, and telecommunications.

Notes to the editor for reference purposes only:

This press release has been issued by Deloitte Touche Tohmatsu India LLP. Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee (“DTTL”), its network of member firms, and their related entities. DTTL and each of its member firms are legally separate and independent entities. DTTL (also referred to as “Deloitte Global”) does not provide services to clients. Please see www.deloitte.com/about for a more detailed description of DTTL and its member firms.