Future of Taxation in India: Trends and Predictions

ABSTRACT

The taxation system in India is evolving with economic reforms, digitalization, and global influences. Key trends include the rationalization of direct and indirect taxes, artificial

intelligence (AI) in tax compliance, faceless tax administration, and the growing impact of international tax treaties. The introduction of Goods and Services Tax (GST) has streamlined indirect taxation, while digital taxation and AI-driven automation are improving transparency and efficiency. Additionally, global tax policies like Base Erosion and Profit Shifting (BEPS) and sustainability-focused green taxation are shaping future policies. The focus on taxpayer education and assistance will further enhance compliance, ensuring a balanced tax system.

Keywords

Taxation in India, GST, direct and indirect taxes, artificial intelligence in taxation, faceless tax administration, international tax treaties, digital taxation, Base Erosion and Profit Shifting (BEPS), green taxation, taxpayer education.

INTRODUCTION

In a rapidly changing world, tax laws are necessary as they have a major impact on the economic structure of the country. As technological outcomes and global dynamics change, it is extremely important to study how tax laws will develop in the future and predict trends that will affect

income tax. By highlighting predictions and models that may affect future income taxes, this article addresses many aspects of the development of tax law.

Economic growth and national control fall under tax. In recent years, significant changes have been made to the tax system of India in order to increase compliance, widen the income base and increase efficiency. Companies, legislators and taxpayers should know the following tax trends and forecasts, because India goes to a more digitized and transparent tax system.

Artificial Intelligence can be used in taxation as follows:

Collection of Data:- AI can be used to collect data from various transactions within the limits, store and analyze it, and collect these data for the province and store it in the department system.

Data Analysis: All data collected by or downloaded from AI can be analysed by IT and rely on the conclusion that the number of citizens makes transactions where income appears to have exceeded the limits required to pay taxes and file an IRT. Risk Analysis: AI can also analyze the risks associated with the creation of tax policies. The results can be controlled correctly.

Automation: Automation may work more effectively as it reduces the time acceptance process of data analysis. Various systems use automation to overcome the best results. This is because human error is avoided.

Here is a pie chart illustrating the projected impact of various tax reforms in India beyond 2025, highlighting key areas such as digitalization, GST reforms, the upcoming Income Tax Bill, and green taxation.

Here is a table showing recent and projected tax collection trends in India (in lakh crore INR): q2

This data provides insights into India’s increasing tax revenues, reflecting economic growth and tax policy reforms.

Framing Policies Based on Taxation :

Governments can develop in-budget tax policies based on AI analysis and digitization, as they can provide the best data through artificial intelligence automation and tools. However, the Ministry of Policy can take this into consideration and create productive policies that are much better than tax laws. The best policy can provide more effective tax laws and stabilize the financial situation of the country. AI and digitalization-based analyses allow demographic

changes to the creation of tax policies. The AI can provide global tax reforms: – The use of AI to analyze and develop policies can provide strategic change in the global tax system, because many countries can draw advantages because it can be the revolutionary policy strategy for

governments of many countries.

The Future of Tax Laws: Predictions and Trends Income Tax

While investigating the future of tax laws, you should consider potential forecasts and trends that will affect income tax. The important points to consider are:

1. Automation and Artificial Intelligence in Tax Filing

Automation and the development of artificial intelligence (AI) will have a major impact on

future tax systems. These innovations could completely change the way revenue declarations are submitted and managed. Taxpayers can predict faster and more accurate income declaration

procedures using AI-fueled tax software. Audit and fine probability can be used to identify potential errors and inconsistencies using automated learning algorithms.

2. International Tax Cooperation and Transparency

Tax authorities pay more attention to international tax cooperation and transparency in an increasingly globalized world. To prevent tax evasion and guarantee the equitable taxation of multinational companies, countries actively cooperate. Closing loopholes and preventing tax evasion are the goals of initiatives such as Basic Erosion and Change in Profits (BPS) and General Reporting Standards (CRS).

3.Digital Taxation and E-commerce

Global tax authorities are faced with new problems as a result of the growth of e -commerce. In order for online enterprises to be properly subject to tax as digital transactions have become

more common, tax laws must be updated. Digital services taxes and sales taxes on online

purchases have already been implemented or are being considered by a number of nations. To address the changing nature of the digital economy, additional developments in digital taxation are likely to occur in the future.

4. Sustainability and Green Taxation

Tax laws should include green tax policies as concerns about climate change and environmental sustainability grow. Governments can use tax losses and penalties on businesses that do not

follow permanent standards to encourage environmentally friendly business practices. This model underscores the importance of tax law in stimulating sustainability and is consistent with the global movement towards a greener economy..

5. Changing Tax Rates and Structures

Governments can change tax rates and structures as they change financial policies to resolve economic issues. You can expect future tax rate changes, such as personal income tax and

businesses. To maintain tax justice and efficiency, governments can also overestimate tax categories and thresholds.

5. Focus on Taxpayer Education and Assistance

 In many cases, tax laws are complicated and lead to confusion and mistakes among taxpayers. To resolve this issue, future tax policies will likely focus on taxpayer training and support programs.

These initiatives aim to increase tax literacy, provide the necessary management, and enable taxpayers to include their duties fully and navigate more effectively in the tax system.

Conclusion:

 Artificial intelligence can play an important role in tax policy training by providing database information for better decision-making. However, AI cannot only replace human judgment. This is because it works only with available data without independent inference. Expert supervision

remains necessary to ensure the accuracy of AI-controlled tax policies.

The future of income tax will have a major impact on the Tax Development Act. The main trends, such as automation, international tax cooperation, digital taxation, sustainable development initiatives, the modification of structural tax rates and the improvement of taxpayers’ education, will play a decisive role in the training of taxation. In order to adapt effectively to these changes, individuals and businesses must accept technological achievements, remain aware of the renewal of policy and, if necessary, seek professional leadership.

REFERENCES

1. Government of Income Tax Act, 1961. Available at: https://incometaxindia.gov.in

2. Central Board of Direct Taxes (CBDT). Annual Report on Tax Reforms and

Available at: https://www.incometaxindia.gov.in

3. Goods and Services Tax (GST) GST Reforms and Digital Taxation. Available at: https://gstcouncil.gov.in

4. Organisation for Economic Co-operation and Development (OECD). Base Erosion and Profit Shifting (BEPS) Initiative. Available at: https://www.oecd.org/tax/beps

5. Ministry of Finance, Government of Economic Survey of India 2024-25. Available at: https://www.indiabudget.gov.in/economicsurvey

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Submitted By: Anu Sharma | 4th Year, B.A. LL.B. (Hons.) | Lovely Professional University, Punjab