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The Income Tax Department is working on a system to integrate the new e-filing portal with stock exchanges using Artificial Intelligence, in an attempt to trace trade transactions, including futures and options, according to a report. The system is likely to be operational by the year-end, the Business Standard reported.

Tax Portal 2.0

The AI-enabled system will check for discrepancies between the data disclosed by an assessee and match it against the data fetched from stock exchanges, which will help in detecting inconsistencies, particularly those related to non-filers of income-tax return (ITR), the report added quoting an official.

The government’s move to detect discrepancies in tax returns comes at a time of concern over growing retail participation in the equity markets, the business daily said. The share of individual retail investors in the National Stock Exchange’s cash market turnover has shot up from 39% in 2019-20 to 45% in 2020-21, according to the report.

After integration, the portal will automatically compare the turnover on exchanges, based on the permanent account number, with the reported figures in the respective ITRs. Accordingly, tax authorities will process the data and take up those matters for further scrutiny.

Aim behind the new portal

The eventual goal of the portal will be to integrate the database from depositories, clearing corporations and registrars with issue-and-share transfer agents and other intermediaries. The publication quoted an official as saying that the automatic exchange of information or real-time exchanges or even full integration of databases had been under discussion and such integration will help the department match data on a real-time basis, rather than wait for exchanges and other participants to file a statement of financial transactions (SFT).

The I-T department had earlier this year notified market intermediaries, including exchanges, to submit information on capital gains made on listed securities and mutual funds, the business daily reported.

It requires companies to provide details of dividends it has paid and needs banks, post offices, and non-banking financial companies to submit all information on interest earned.

This development followed an announcement made in the Union Budget for the current financial year according to which, to further ease the filing of returns, details of capital gains from listed securities, dividend income and interest from banks, post office, etc., would also be pre-filled in tax forms for taxpayers.