Tax Dept Goes Digital: Monitors Portal Visits to Encourage ITR Filing

In a significant push towards increasing tax compliance and expanding India’s tax base, the Income Tax Department has started using advanced digital tracking methods to monitor taxpayer behaviour online. Central Board of Direct Taxes (CBDT) Chairman Ravi Agrawal recently revealed that the department is now actively tracking online visits to its portals and filtering Permanent Account Numbers (PANs) to identify individuals and entities who may not be complying with tax regulations.

This move marks a technological shift in how the government approaches tax enforcement—leveraging digital footprints and behavioural analytics to gently “nudge” people toward voluntarily filing their returns and paying dues.

Online Behaviour Analysis to Boost Compliance

According to Ravi Agrawal, the Income Tax Department is employing data analytics to study how often individuals visit its e-filing portals, what actions they take, and whether or not they eventually file returns. If someone frequently checks their tax details, tracks refunds, or browses filing procedures but stops short of actually submitting returns, that pattern could now trigger alerts.

The department then cross-verifies these cases with PAN data and other financial records to understand whether these individuals have a tax liability. In such cases, instead of immediately initiating enforcement action, the department uses a nudge-based strategy—sending reminders, emails, and sometimes even WhatsApp messages to encourage voluntary compliance.

This system is part of a broader strategy under the “faceless” tax regime to improve ease of compliance while tightening the noose on willful defaulters.

PAN Filtering and AI Integration

Agrawal disclosed that PAN filtering is becoming increasingly sophisticated. The system now segments PAN holders based on multiple criteria: income patterns, transactions flagged by financial institutions, high-value purchases, and social media cues. For instance, if a person’s lifestyle, as reflected on platforms like Instagram or Facebook, doesn't match their declared income, it may warrant a closer look.

Artificial Intelligence (AI) and Machine Learning (ML) algorithms are being used to sift through terabytes of data collected from banks, mutual funds, GST returns, and even stock market investments. These tools generate a risk profile for each PAN, helping the department decide where to focus its attention.

This technology-backed monitoring also complements the Annual Information Statement (AIS) and Taxpayer Information Summary (TIS), which already provide taxpayers with a consolidated view of their financial activity.

Gentle Nudge Before Hard Enforcement

The strategy is built around the behavioral economics concept of “nudging”—a subtle push that encourages people to do the right thing without fear or coercion. The tax department is consciously trying to move away from the older image of surprise raids and harsh notices toward a model of persuasion and digital engagement.

For example, if someone spends heavily on luxury travel and posts frequent updates online but fails to file an ITR, they may receive a soft notice asking them to clarify the mismatch or to submit their return. Similarly, non-salaried professionals with significant digital footprints may get pre-filled ITRs to simplify the process and remove excuses for delay.

This soft-touch method has proven effective in boosting compliance, particularly among first-time filers, freelancers, and gig economy workers who often remain outside the formal tax net.

Results Already Visible

Preliminary data suggests that these measures are already yielding results. The number of Income Tax Returns (ITRs) filed for Assessment Year 2024-25 has seen a notable uptick compared to the previous year. Many of these new filers are from Tier 2 and Tier 3 cities, where the digital push and increased awareness through government campaigns have created greater responsiveness.

Further, the department’s analytics dashboard has shown a reduction in “intentional non-compliance” cases—those where individuals had taxable income but chose not to file—suggesting that the fear of being digitally monitored may be working as a deterrent.

The I-T department is also seeing better response rates to its communication efforts. Personalized nudges, tailored to the taxpayer's profile, have led to more engagement and prompt return filings, even among defaulters who had ignored earlier notices.

Data Privacy and Legal Oversight

While the shift to tracking digital behaviour raises questions about privacy, CBDT officials insist that the process remains within the legal boundaries of data usage and taxpayer confidentiality. All data accessed or analysed comes through government-authorised channels and is protected under the Information Technology Act and relevant sections of the Income Tax Act.

Officials also stress that the focus remains on using this data for compliance and taxpayer convenience rather than prosecution. Only in cases where multiple reminders are ignored and substantial tax evasion is suspected does the department move toward stronger enforcement.

Linking PAN with Aadhaar: A Foundational Step

The success of this entire digital compliance ecosystem rests heavily on the PAN-Aadhaar linkage. With Aadhaar becoming a universal identifier in India, its integration with PAN has allowed the tax department to merge various databases—from telecom and banking to mutual funds and property registries—into a unified analytics system.

This linkage enables a 360-degree view of a taxpayer's profile, making it harder for individuals to hide behind fragmented data or misrepresent income. Agrawal pointed out that nearly 95% of PANs have already been linked with Aadhaar, forming the backbone of the department’s digital compliance initiatives.

Expanding the Tax Base Beyond the Salaried Class

Another aim of these digital nudges is to widen the taxpayer base beyond the traditional salaried class. India has nearly 80 million PAN holders but only around 60 million file returns regularly. The gap is especially stark among business owners, professionals, gig workers, and social media influencers—groups whose income often falls outside formal salary structures.

By tracking online patterns, transaction trails, and lifestyle indicators, the tax department hopes to bring these individuals into the tax net without launching a massive crackdown.

Agrawal stated that the aim is not to harass but to educate and engage. Many people avoid filing taxes not because they want to evade, but because they find the process confusing or believe their income is too low. With user-friendly portals, pre-filled forms, and data-based nudges, the department wants to turn potential defaulters into active contributors.

Future Plans: More Tech, More Transparency

Looking ahead, the CBDT plans to deepen its tech adoption. Blockchain verification of financial documents, AI-powered fraud detection, and real-time GST-PAN-ITR integration are already on the roadmap. The department is also working on a taxpayer rating system, which could rank individuals and entities based on their consistency and timeliness in tax compliance.

This rating may eventually be linked with credit scores, passport applications, and even public procurement eligibility, creating long-term incentives for staying compliant.

In short, the Income Tax Department is turning into a data-savvy, AI-assisted watchdog that rewards transparency and nudges people into becoming responsible taxpayers—without the fear of the knock at the door.