Companies Struggle To Keep Pace With Tax Digitalisation, Survey Finds

A Deloitte survey has highlighted that organisations facing challenges in their journey towards tax digitalisation with key obstacles such as a shortage of skilled tax technology professionals, bandwidth constraints, resistance to adopting new technologies and difficulties integrating existing systems with external solutions or government portals. 

According to the Deloitte survey, these challenges highlight the need for additional support and resources to enable smoother transitions. As India Inc. continues to embrace the digital tax revolution, the collaboration between government and corporations will be crucial for driving progress. 

The survey added, “It will enhance compliance and foster innovation, ensuring that the future of taxation in India is promising and impactful.” Notably, the second edition of Deloitte India’s Income Tax Digitalisation in India survey revealed that India Inc. has shown a positive perception towards tax technology and significant trust in the government’s digital initiatives. 

The momentum towards digitalisation has led to the ease of doing business, enhanced efficiencies and reduced time spent on compliance for taxpayers. The survey highlighted that 92 per cent of organisations have either adopted or are planning to adopt technology-driven tax platforms within the next five years, an increase from less than 80 per cent in 2023. 

It added that now, taxpayers are comfortable with and are open to exploring new-age technologies, such as AI/ML and GenAI in their tax functions, with over 50 per cent of organisations expressing confidence in implementing these innovations. The survey findings revealed that 74 per cent of respondents expect SAF-T to facilitate near real-time reporting and compliance monitoring. Additionally, 63 per cent of respondents look forward to APIs to streamline data exchange with tax portals.

Deloitte’s survey revealed that 77 per cent of companies have increased their budgets for tax transformation and automation in FY24, up from 67 per cent last year— highlighting the growing recognition of the need for a robust, technology-driven tax ecosystem. Rohinton Sidhwa, Partner, Deloitte India said that organisations are embracing advanced technologies, such as Robotic Process Automation (RPA), blockchain, GenAI, machine learning, data integration and analytics to accelerate the digital transformation of their tax functions.

He added, “The Indian government’s announcement to fully digitise the remaining income tax services, including rectifications and appellate orders, within the next two years is a commendable step. This initiative will further enhance the taxpayer experience and make the system more streamlined, transparent and user-friendly.”

The use of third-party tax software and cloud-based solutions has increased, with 69 per cent of respondents— up from 57 per cent in 2023. As organisations embrace these innovations, they prioritise security and data privacy in their digital transformation journeys, the survey mentioned.

Simultaneously, businesses are focusing on streamlining TDS/TCS compliance. The survey indicates that 70 per cent of respondents now advocate for tech-driven solutions in this area, a marked increase from 49 per cent in the previous year. 

According to the survey, “Implementing technology will also facilitate the resolution of cases on grievance portals, automate reconciliation processes, track the progress of appeals and rectification applications and expedite the issuance of refunds or deletion of demands.”