India Inc. embraces digital tax revolution: Deloitte survey shows confidence in government’s tech-tax Initiatives with 92 percent shift in digital adoption

• Digital initiatives of the tax administration have led to the ease of doing business

• More than 50 percent of organisations show confidence in AI/ML and Generative AI (GenAI) adoption, with 16 percent ready to deploy immediately

• Taxpayers expect the government to adopt SAF-T to enable near real-time reporting and compliance monitoring

New Delhi, 19 November 2024: India is undergoing a significant transformation in tax digitalisation, with the government’s strong push towards innovation and a taxpayer-friendly ecosystem. The second edition of Deloitte India’s Income Tax Digitalisation in India survey reveals that India Inc. has shown a positive perception towards tax technology and significant trust in the government’s digital initiatives. The momentum towards digitalisation has led to the ease of doing business, enhanced efficiencies and reduced time spent on compliance for taxpayers.

Reflecting an increase in technology adoption, the survey highlights that 92 percent of organisations have either adopted or are planning to adopt technology-driven tax platforms within the next five years, an increase from less than 80 percent in 2023. This surge reflects the growing recognition of technology’s potential to streamline compliance, enhance efficiency and future-proof tax operations. Now, taxpayers are comfortable with and are open to exploring new-age technologies, such as AI/ML and GenAI in their tax functions, with more than 50 percent of organisations expressing confidence in implementing these innovations.

The survey findings indicated an impressive track record of the government around e-initiatives, raising taxpayers' expectations. Taxpayers now expect the government to adopt the Standard Audit File for Tax (SAF-T) for a more efficient and faster audit process and open APIs (such as GST) for seamless connectivity. Notably, 74 percent of respondents expect SAF-T to facilitate near real-time reporting and compliance monitoring. Additionally, 63 percent of respondents look forward to APIs to streamline data exchange with tax portals.

Highlighting the evolving role of technology in taxation, Rohinton Sidhwa, Partner at Deloitte India, said, “The 2024 Budget’s focus on “Viksit Bharat”, with a strong emphasis on innovation and R&D, seeks to continue the transformative change in tax administration. The government’s progress in digitalisation is already reshaping the tax landscape, enhancing the ease of doing business and driving efficiencies that taxpayers highly appreciate. Deloitte’s survey reveals that 77 percent of companies have increased their budgets for tax transformation and automation in FY24, up from 67 percent last year—highlighting the growing recognition of the need for a robust, technology-driven tax ecosystem. Organisations are embracing advanced technologies, such as Robotic Process Automation (RPA), blockchain, GenAI, machine learning, data integration and analytics to accelerate the digital transformation of their tax functions.”

He added, “The Indian government’s announcement to fully digitise the remaining income tax services, including rectifications and appellate orders, within the next two years is a commendable step. This initiative will further enhance the taxpayer experience and make the system more streamlined, transparent and user-friendly.”

The use of third-party tax software and cloud-based solutions has increased significantly, with 69 percent of respondents—up from 57 percent in 2023—confirming their adoption of these tools. The growing reliance on third-party solutions reflects an increasing comfort with cloud technologies, which provide cost-effective, secure and scalable options for managing tax compliance. As organisations embrace these innovations, they prioritise security and data privacy in their digital transformation journeys.

Simultaneously, businesses are focusing on streamlining TDS/TCS compliance. The survey indicates that 70 percent of respondents now advocate for tech-driven solutions in this area, a marked increase from 49 percent in the previous year. Implementing technology will also facilitate the resolution of cases on grievance portals, automate reconciliation processes, track the progress of appeals and rectification applications and expedite the issuance of refunds or deletion of demands.

However, despite these advancements, organisations still face challenges in their journey towards tax digitalisation. Key obstacles include a shortage of skilled tax technology professionals, bandwidth constraints, resistance to adopting new technologies and difficulties integrating existing systems with external solutions or government portals. These challenges highlight the need for additional support and resources to enable smoother transitions.

Looking ahead, advancements in AI-driven tax dispute resolution, blockchain for compliance and end-to-end automation are set to enhance efficiency, reduce manual interventions and promote greater transparency across the tax landscape.

As India Inc. continues to embrace the digital tax revolution, the collaboration between government and corporations will be crucial for driving progress. It will enhance compliance and foster innovation, ensuring that the future of taxation in India is promising and impactful.

About the survey

Deloitte India LLP conducted the second edition of the Income Tax Digitalisation Survey in an online mode, engaging over 250+ industry professionals across a spectrum of industries, including technology, media and telecommunications; financial services; life sciences and healthcare; consumer; energy, resources and industrials; and government and public services. The survey assessed the impact, challenges and organisational preparedness for digital tax administration.

The respondents included C-suite executives, general managers, finance directors, presidents, and finance and taxation managers. The survey offers a comprehensive view of technology’s role in the tax function and provides an industry perspective on various technology initiatives of the Central Board of Direct Taxes/Income Tax Department.

This press release has been issued by Deloitte Touche Tohmatsu India LLP.
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