Income Tax Department’s AI Keeps A Close Watch, When High Bank Balances Reveal More Than They Should; Details Here

New Delhi: If your savings account maintains a high balance despite low expenses, the Income Tax Department may ask you to explain the source of your funds. Over recent months, the department has detected several such cases where individuals deposited large sums in savings or fixed deposit accounts but made very few withdrawals.

Deep Investigation After Searches

After conducting searches and data analysis, the department found that in many cases, account holders withdrew only a small portion of the total money received. This pattern had been continuing for several years. When notices were issued, many individuals failed to justify how they managed their daily expenses, children’s school fees, and other essential costs.

Suspicion of Unaccounted Cash Transactions

Bank records revealed that cash withdrawals were minimal, leading officials to believe that these individuals were meeting their daily expenses through undisclosed income—possibly black money. The department therefore concluded that other unreported sources of income were being used, which constitutes tax evasion. Consequently, formal notices have been issued in such cases.

Trend Extends Beyond Businesses

According to a senior official, such practices were earlier seen mainly among business owners who showed personal expenses as company costs. However, similar trends have now emerged among salaried individuals as well. For example, a person drawing a monthly salary and owning multiple rental properties may collect rent in cash to avoid declaring it in their income tax return, even though all income must legally be reported.

AI Makes Detection Easier

Sources said the Income Tax Department is now using Artificial Intelligence (AI) to track such savings accounts. AI systems analyze annual financial transactions linked to a PAN card and identify accounts with significantly lower withdrawals compared to deposits. Generally, the department assumes that 30–40 percent of one’s income should be spent on living expenses. When actual withdrawals fall below this range, accounts are flagged for scrutiny.

The New Age of Smart Tax Surveillance

With AI-enabled monitoring, the Income Tax Department has strengthened its ability to trace mismatches between declared income and spending habits. This technological intervention aims to ensure transparency and curb the use of unreported cash in the financial system. Individuals are advised to disclose all sources of income honestly to avoid tax notices and penalties.