By Dinesh Kanabar & Abhishek Mundada, respectively Chairman and CEO & Partner, Dhruva Advisors
Before algorithms took over and artificial intelligence (AI) began to decode tax, tax professionals mastered their craft through files, forms, and notes. There was a time when tax meant towers of files, often dusty, ink-blotted notes in margins, paper challans obtained after standing in long queues at banks, and an indexed paper book. Those who lived them still remember the rustle of paper, the smell of ink, and the possession of physical order with a sense of nostalgia.
Tax as a profession generally rests on three aspects: (i) compliance/reporting—routine but critical; (ii) technical expertise and judgement impacting interpretation, risk assessment, and decision-making; and (iii) tax assessment and litigation—everything around preparation and presentation has changed.
The pace of digital transformation, amplified by the effects of AI/machine learning (ML), has rewritten how tax is administered and more importantly how professionals prepare to deliver solutions. Staying relevant today means keeping pace with not just the law, but also the manner in which the tax is being implemented both at the level of the income tax department and taxpayers.
India has moved rapidly towards a tech-driven tax system. Its digital tax journey began over two decades ago with electronic filing of tax returns. What began as a modest approach to digitisation has evolved into a fully integrated data ecosystem—in the nature of income data reporting in the annual information statement, cash deposits in bank accounts and reporting other financial transactions, faceless assessments, etc.
Thus far, tax professionals and their team used to spend a substantial time and resources on tax compliances and filings that were done manually, albeit with the help of technology. Today, they are embracing technology (and reducing human involvement) to prepare, compile, and undertake tax reporting functions—such as automatic extraction of data from accounting software, processing, reduced manual efforts on filling and review. The focus should be more on value-added and productive aspects to improve efficiency. For instance, better income estimation for discharging advance tax, real-time reconciliation of income mismatch between accounts and tax records to avoid discrepancies and mitigate potential addition/litigation, consistency in undertaking reporting under different legislations (related-party disclosures in accounts, tax, company law, etc.).
Today, technology, especially with the use of AI/ML, plays a crucial part in sharpening the technical expertise that tax professionals imbibe while dealing with routine and complex matters. AI and automation support research, summarise content, monitor tax notices, and speed up drafting—but judgement remains human. However effective AI tools may be, they are not 100% accurate. The role of professionals becomes crucial in critically evaluating factual/legal aspects along with practical experiences of potential challenges. AI’s current capabilities are limited here.
Further, tax professionals are operating in an environment where data trails are real-time, scrutiny selections are algorithm-driven, and taxpayer behaviour is analysed at scale with sophisticated technologies. Platforms or tools like GSTN, Project Insight, statement of financial transaction reporting, Financial Intelligence Unit 2.0/Suspicious Transaction Report and the Advanced Analytics in Indirect Taxes analyse behaviour at scale, track patterns, and identify mismatches almost instantly. Tax administration has shifted from periodic checks to real-time monitoring. It is thus imperative for tax professionals to be cognisant of these aspects for better risk assessment and decision-making. In fact, tax is one area where the government has moved far ahead in adopting technology and digitisation, and it is now for the professionals to catch up with the digital architecture in place.
Tax controversy has transformed as well. In-person representation and courtroom presence once played a large role. Now, in a faceless environment, clarity of thought and precision in written submissions assume more importance. Digital submissions must be accurate, self-explanatory, well-supported, and watertight.
However, the concerning area in tax litigation is too much dependency on the results thrown by AI tools—that remain unverified—during tax assessments. It is widely seen that AI hallucinates (throwing up results/judicial precedents that are non-existing) and thus its conclusion can be misleading and detrimental which makes human oversight indispensable. Recently, the Bombay High Court criticised the reliance placed by a tax officer on results thrown by AI—based on non-existing cases—during assessments against the taxpayer. So, unverified AI output has no place in judicial/quasi-judicial reasoning.
The opportunity is significant, but so are the challenges. The future belongs to professionals who combine smart technology with strong ethics, sound training, and unwavering professional judgement. Far from replacing, technology empowers professionals by automating routine tasks and freeing up experts to focus on complex, value-added services. What defines a true tax professional is unchanged—clarity, technical depth, and the ability to navigate complexity. What has changed are the tools at hand: sharper, faster, and infinitely more connected.