Amid the government’s push for digitalisation towards its ease of doing business efforts, organisations are increasingly moving towards having a technology-driven tax function, said a survey by Deloitte India on Tuesday aimed to gauge India Inc.’s perception towards tax technology and the government’s digital initiatives.
The second edition of the survey on income tax digitalisation in India said that while larger organisations are expected to adopt technology rapidly, small organisations have also charted paths, with 81 per cent looking for a technology-driven tax function in the next five years.
The survey noted that 92 per cent 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 per cent in 2023.
“This surge reflects the growing recognition of technology’s potential to streamline compliance, enhance efficiency and future-proof tax operations,” the survey said.
The methodology of the survey involved primary research including an online survey of over 250 industry professionals to understand the use of technology in the tax function in organisations across industries. The organisations’ turnover ranged between less than Rs 500 crore and more than Rs 6,500 crore.
Moreover, taxpayers are comfortable with exploring new-age technologies, such as AI/ML and GenAI in their tax functions, with more than 50 per cent of organisations expressing confidence in implementing these innovations.
However, most respondents cite integration issues with current systems and lack of tax technology professionals as barriers to tax function transformation.
To tackle the challenge at their end, about 44 per cent of respondents plan to use a combination of various training methods to address diverse learning needs around tax technology while 27 per cent are looking to have on-the-job training and mentorship programmes.
Taxpayers said they 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 per cent of respondents expect SAF-T to facilitate near real-time reporting and compliance monitoring. Additionally, 63 per cent of respondents look forward to APIs to streamline data exchange with tax portals.
Speaking on the role of technology in taxation, Rohinton Sidhwa, Partner at Deloitte India, said the survey reveals that 77 per cent of companies have increased their budgets for tax transformation and automation in FY24, up from 67 per cent last year.
“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,” said Sidhwa.