When Tax Meets Technology: Transforming the Tax Profession for the Digital Age
By Dinesh Kanabar & Abhishek Mundada, Chairman and CEO & Partner, Dhruva Advisors
November 27, 2025 — The Financial Express
The traditional world of tax — once dominated by towering piles of files, marginal ink-blotted notes, manual bank challans, and paper-bound indexed books — is undergoing a profound transformation. The very fabric of tax administration and the role of tax professionals is being rewritten by the advance of technology and digitisation, driven in particular by artificial intelligence (AI) and machine learning (ML).
From Paper Trails to Digital Ecosystems
In past decades, tax professionals mastered their craft through manual compliance and reporting tasks. These included painstaking preparation of tax returns, on-ground verification, and in-person courtroom representation in litigation. The profession rested on three core aspects: routine compliance and reporting, technical expertise and judgement, and the preparation and presentation in tax assessments and litigation.
However, India has led a rapid digital transformation in tax administration — a journey that began over 20 years ago with the introduction of electronic filing of tax returns. What started as a rudimentary adoption of technology has evolved into a fully integrated data ecosystem. Today’s tax system incorporates real-time income data reporting via annual information statements, automated monitoring of cash deposits and financial transactions, faceless tax assessments, and algorithm-driven scrutiny selection. These advances enable the government to monitor compliance and taxpayer behavior at scale and in real time.
The Changing Role of Tax Professionals
Tax professionals no longer primarily focus on manual filing and data entry. Technology now automates many routine reporting functions, including automatic extraction of financial data from accounting software and intelligent error-checking that reduces human effort. This shift allows professionals to concentrate on value-added activities such as income estimation for advance tax payments, real-time reconciliation of accounts with tax records to prevent discrepancies, and ensuring consistency in disclosures across tax, company law, and accounting standards.
AI and ML-powered tools further empower tax experts by assisting with research, summarizing complex legal and technical content, monitoring tax notices, and accelerating documentation drafting. Yet, the authors emphasize that human judgement remains irreplaceable. AI can complement but not replace professionals’ critical evaluation of factual and legal nuances. Concerns about AI "hallucinations"—where tools generate inaccurate or fabricated information—are real, as evidenced recently when a Bombay High Court criticized a tax officer for relying on AI-generated, non-existent judicial precedents during an assessment.
Real-Time Monitoring and Risk Management
The data-driven approach of tax authorities demands that professionals stay abreast of the evolving digital architecture. Tools like the Goods and Services Tax Network (GSTN), Project Insight, Financial Intelligence Unit 2.0, and advanced analytics platforms scan for suspicious transactions and behavioral patterns around the clock. This shift from periodic checks to continuous monitoring necessitates sharper risk assessment and proactive decision-making by tax advisors.
The New Landscape of Tax Litigation
Faceless tax assessments have reshaped tax controversy resolution. The importance of clear, concise, well-supported, and error-free written submissions has surged, with courtroom presence and oral advocacy taking a backseat. This further heightens the need for professionals to combine technical depth with digital literacy to succeed in this new environment.
Balancing Opportunity and Challenges
The integration of smart technology in tax functions presents enormous opportunities: automation of mundane tasks, enhanced analytical capabilities, and greater overall efficiency. However, this digital leap also brings challenges—ensuring ethical use of AI, maintaining rigorous professional judgement, and confronting the dangers of blind dependence on unverified AI outputs.
According to the authors, the future belongs to tax professionals who harness technology while upholding strong ethics, comprehensive training, and sound professional judgement. Far from being replaced, experts are empowered by technology to deliver complex, value-driven services with greater clarity and precision.
Conclusion
Tax administration in India has moved far ahead in adopting cutting-edge digital tools, and professionals must quickly catch up with this evolving architecture. The essence of the tax profession—clarity of thought, technical expertise, and the ability to navigate complexity—remains unchanged, but the tools now at their disposal are sharper, more connected, and infinitely more powerful.
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This article was first published on November 27, 2025, at 5:00 AM IST by The Financial Express.
