India Inc. is embracing digitalisation and technology integration to become equal stakeholders in the government’s drive towards a contactless tax regime. To assess the impact of the government's technology-backed initiatives, Deloitte India conducted a survey titled “Income-Tax Digitalisation in India,” highlighting industry acceptance and preparedness for the ever-changing tax landscape.
Most Effective Digital Tax Administration Initiatives
The survey found that the improved income-tax portal is one of the most effective digital tax administration initiatives, thanks to its user-friendly interface and e-documentation trail maintenance. Other successful initiatives include computer-based scrutiny selection, speedy processing of returns and refunds, and faceless assessments.
Increased Use Of Tax Technology
According to the survey, 92 per cent of businesses with a turnover of more than Rs 6,400 crore have significantly increased the usage of tax technology. Additionally, 65 per cent of respondents have already started witnessing a substantial change in their business operations by adopting digital tax initiatives. About 85 per cent of the respondents plan to transform their tax operations into a technology-driven function over the next five years.
Automation & Customisation
Approximately 67 per cent of the companies have already increased their tax transformation and automation budget. Technology in tax has progressed from spreadsheets to basic tax deducted at source (TDS), and income tax return tools have evolved to include various solutions such as litigation management tools, tax compliance trackers, TDS data reconciliations, data extractions from enterprise resource planning (ERP), tax provisioning tools, tax audit report tools, and more. Organisations are also adopting specific and customised automation, including implementing tax-sensitised ERPs.
Specially Configured ERPs For Tax Compliance
The survey results show a rise in the utilisation of specially configured ERPs for tax compliance, particularly in companies with a turnover of more than Rs 3,000 crore. This trend is expected to increase in the coming years as more organisations opt for tax-sensitised ERPs to resolve data collation and reconciliation challenges and enable efficient tax reporting.
The Need For A Consistent & Future-Facing System
Businesses must be future-facing to extract the best out of the system, as the transformation has already begun. Rohinton Sidhwa, partner at Deloitte India, emphasises the importance of consistent platform functioning and availability. While adopting digital governance has led to parallel evolution of the stakeholders, tax functions must put their best foot forward to embrace this digital change.
A Shift Towards Technology-Driven Internal Tax Functions
About 79 per cent of survey respondents believe that their internal tax functions will be driven by technology in the next five years. However, there is still a need to change the current mindset regarding technology integration, increase budgets for smaller organisations, and develop skilled talent to expedite the transformation journey.
