Budget 2025 is poised to roll out the next generation of the income tax core application for audits and investigation embedded with AI for flagging frauds as well as for assessing returns , a senior government official said.

The Finance Bill is likely to introduce ITBA 2.0, an enhanced version of the Income Tax Business Application with AI capabilities which will facilitate faster and more effective faceless assessments, seamless return fillings and improved adherence to rules, he said.

According to him, “The new upgrade for the system, ITBA 2.0, will address these needs as well as a great deal more. Additionally, it will integrate artificial intelligence to assess returns, flag discrepancies and reduce fraudulent activities. The current system only supports 8 crore but the updated version is designed to increase this capacity significantly, and at the same time it will enable greater speed for upload of documents and response times. The cabinet note for this initiative is already completed, interministerial discussions have only just begun” Official told Moneycontrol.

However, he said the proposal, which is under active consideration of the cabinet is likely to be included in the Budget 2025.

ITBA is the focal system through which income tax officers conduct audits, investigations, impose penalties, conduct appeals, carry out compliance management, and perform HR related activities. The transformation is meant in a manner to bring in a new technology stack and build a consistent and an application that is ready for the future.

With regard to the tax payers

AI-driven automation: The system will incorporate the use of AI in order to enable effective assessment, the faster and efficient detection of anomalies and automated communication including reminders and notice.

Handle more taxpayers with shorter turnaround times: The system intends to provide better facilities which will allow it to accommodate a higher number of tax participants while at the same shortening the waiting times of tax payers.

Tracking progress in real time: The taxpayers will gain from being able to monitor the progress of their returns, refunds and assessments, increasing the level of honesty.

Reduction of fraud: The greater validation of data as well as security features introduced will help in limiting errors and fraudulent acts.

Moving on from the speedy dissolving of returns and refunds, the automated updates and notifications would also help in enhancing the interaction between the tax payers and the authority in charge of the tax easing the amount of time sensitive measures required and ensuring that confusion is kept to a minimum, said the official.

Pardon my French, but faceless assessments are only going to improve with the adoption of ITBA 2.0. This will ensure taxpayers and tax authorities don’t spend more time than they ought to in a bid to complete their tasks at hand. I see this new ITBA lowering the time taken to implement every fiscal policy change laid out in the budget too.''

Gaurav Padhan, a partner at KPSG & Co, shared with Moneycontrol that while ITBA is a commendable step in hopes of improving the transparency and overall efficiency of India’s tax with its real time update automation features, certain issues still linger that prevent it from reaching its full potential. “For example, you urgently need to reconcile data in the CPC and ITBA because you’ve paid the tax, why does it not appear in ITBA, and why do the CPC and the request from the officer who is in charge show a refund?”