As part of its effort to enhance tax compliance and curb evasion, the Income Tax Department of India has significantly increased its use of Artificial Intelligence (AI) and data analytics to monitor high-value financial transactions.
This move is relevant for both Indian residents and NRIs, especially those investing, buying property, or spending large sums via credit cards in India.
Here’s what you need to know.
AI-Powered Surveillance of Financial Behavior
Tax experts confirm that the government is now actively monitoring your financial behavior using AI. Transactions that may fall under scrutiny include:
- High-value property purchases
- Large investments in mutual funds or stocks
- Big spends on credit cards
- Foreign remittances and cross-border transfers
How Does the Tax Department Get This Data?
Every year, banks, mutual funds, registrars, property registrars, and other financial institutions are required to submit a Statement of Financial Transactions (SFT) to the Income Tax Department.
According to CA (Dr.) Suresh Surana, the department:
- Collates this SFT data
- Cross-checks it with your Income Tax Return (ITR)
- Cross-references with TDS, GST, and foreign exchange transaction records
Using AI and machine learning models, the system identifies any discrepancies or suspicious activity in your income vs. expenditure pattern.
What This Means for NRIs
NRIs with Indian income sources or those managing investments and property in India should take note:
- Ensure your ITR matches your investment and expense patterns
- Declare foreign assets and incomes properly, if applicable
- Maintain clean source-of-fund trails for any high-value purchases
Frequently Asked Questions (FAQs)
Q1: What kind of transactions get flagged?
A: High-value real estate deals, credit card spends over specified limits, mutual fund investments, large cash deposits or withdrawals, and foreign remittances.
Q2: Do NRIs also need to worry about this AI monitoring?
A: Yes. Any NRI earning or spending in India or dealing with Indian financial institutions could be under review.
Q3: What is an SFT (Statement of Financial Transactions)?
A: It’s an annual report submitted by banks and financial entities to the Income Tax Department detailing your high-value transactions.
Q4: Can AI trigger an audit or scrutiny notice?
A: Yes, if your financial profile shows mismatches or unusual activity, AI-generated alerts can lead to further scrutiny.
Q5: How can NRIs stay compliant?
A: Work with a tax advisor, file ITRs regularly, maintain documentation, and avoid large unexplained transactions.
Final Thoughts
The Indian tax system is getting smarter and more connected. For NRIs, it’s crucial to maintain transparency, timely tax filings, and proper documentation. AI surveillance is here to stay, and ignorance is no longer an excuse. At NRIMitr, we help NRIs stay compliant with Indian tax laws while managing their investments and assets with ease.
