New I-T Act to enable AI-driven, rule-based tax system from April 2026
New Delhi, Feb 20, 2026
CBDT chief Ravi Agrawal said the new Income Tax Act, effective April 2026, will create a rule-based, AI-enabled tax ecosystem aimed at reducing disputes, improving certainty and enhancing compliance
The new Income Tax Act, 2025 will usher in a more rule-driven and technology-driven ecosystem for direct tax administration, with artificial intelligence (AI) set to support enforcement and taxpayer services, Central Board of Direct Taxes (CBDT) Chairman Ravi Agrawal said on Friday.
Speaking at the India AI Impact Summit 2026 at Bharat Mandapam during a session on AI-driven enforcement, Agrawal said the law, effective from April 1, 2026, represents a “paradigm shift in the philosophy, procedures and practices of direct tax administration in India”.
“What makes it different is that going forward it is going to be a technology-driven ecosystem,” he said, adding that the simplified language of the new law will help reduce interpretational ambiguity and enable algorithm-based implementation. He said the new framework would help reduce litigation, enhance tax certainty and promote trust-based voluntary compliance.
Anchoring his remarks to the theme of ‘Sarvejan Hitaye, Sarvejan Sukhaaye’ (welfare for all, happiness for all), Agrawal said AI has the potential to transform governance by turning vast data into insights, automating routine work and enabling faster decision-making at scale.
However, he cautioned against blind reliance on technology. “The human has to drive the AI rather than AI driving the human,” he said, stressing the need for strong safeguards, secure and sovereign data foundations, clear accountability and continuous training.
Highlighting early outcomes, the CBDT chief said the department has applied AI “to a limited extent” over the past two financial years, but it has yielded results. Targeted AI-based nudges led to 1.11 crore taxpayers filing updated returns, with a revenue impact of over ₹8,800 crore. Disclosures also included foreign assets worth about ₹99,000 crore and foreign income of about ₹6,500 crore.
Sharing a personal example, Agrawal said he was able to develop a basic training-module application within five to six hours using AI tools — a process that would otherwise have taken months — illustrating the technology’s productivity gains.
Going ahead, the department plans to scale AI-based risk assessment, strengthen digital forensics and expand AI support for taxpayer services to make compliance easier and enforcement more precise, according to Agrawal.
“The discussions at the summit will help us refine our approaches and scale what works to improve speed, consistency and fairness in enforcement,” he said.
[The Business Standard]
