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Operation Clean Money Gets A Big Data Boost With Project Insight Implemented To Catch Tax Evaders


Operation Clean Money Gets A Big Data Boost With Project Insight Implemented To Catch Tax Evaders


India has historically been a haven for tax evaders, as many rich and powerful individuals have slipped under the radar and made away with crores of rupees. The Income Tax Department of India has long been on the tail of such evaders and they have struggled to catch up.

Black money hence became a mainstay of the Indian economy. High-ranking political and governmental officials have continued to evade taxes, along with a cadre of high-earning businessmen who simply do not wish to pay them.



Now, the I-T department might have a weapon to wield against such individuals. An undertaking that has been over 3 years in the making with a purported cost of ₹1,000 crore may prove to be the downfall of tax evaders in India. An analytics and data-based effort to find parties that do not pay tax, the I-T department's coup de grace is known as Project Insight.

Join us as we take a deeper look into how analytics is going to change the way India collects taxes.

Project Insight Will Use Big Data To Catch Tax Evaders

The ITD is on a general trend to curb the use of black money in the economy since the demonetization in 2016. At that time, they introduced a project known as Operation Clean Money. Under this, over 8,200 individuals with an undisclosed income of more than ₹6,746 crore were ferreted out by keeping a close tab on the money that was passing through banks.

They tracked around 2.69 lakh persons who deposited a total of ₹5.27 lakh crore in cash assets during demonetisation. This resulted in assets valued at ₹900 crore being seized.

This also contributed to the statistic that around 23-26% of India's economy runs on black money.

This operation barely scratched the tip of the black money iceberg. According to reports, around ₹90 lakh crores are stored in offshore accounts, with all of this being undisclosed incomes to the ITD. Moreover, there are also other assets such as gold, immovable property and luxury items such as cars and watches that are not directly visible to the ITD.

This lack of knowledge and gaps in perception of money moving around prompted the ITD to revamp their data collection methods and increase their reach of observance. This germinated into Project Insight.

What Is Project Insight

Put simply, Project Insight is an ML and Big Data-enabled information management system. The ITD was previously restricted to collecting data from financial institutions alone, with banks providing information about income and expenditure for individual citizens. To bring together the scattered information into one management portal, the project inculcates practices such as enterprise-level data warehousing, data and web mining, data exchange and centralized processing, and predictive modelling and case analytics capabilities.

The Project will also allow for the collation of IT Returns, IT forms, TDS and TCS statements, and statements from operating financial institutions. It will also include the creation of a new compliance management centralized processing centre.

To enable the ITD to take on a project of such big proportions, Larsen & Toubro2 Infotech won the contract for the project and will undertake it. It was also mentioned that non-disclosure agreements were signed between the two parties to ensure that there is no leakage of sensitive information.

The project focuses on three important facets. Primary among them is bring more people under the net of the ITD. The project will also focus on those who dodged regulation during the demonetisation period. Through a combination of these two factors, the ITD will be able to close in on those with pending demands of over ₹10 lakh with the ITD.

The Insight portal will provide options to manage information in an effective manner.  It will also include a business intelligence feature that will ensure more focused action from the ITD. There are classifications based on income, profit and capital gains, along with a master profile for the taxpayer. These profiles will include relationships, social networks, ITR status, the details of their assets and the summary of their annual tax filings.

How Does It Function

If an individual’s income is low according to tax returns but makes big-ticket purchases, they will get flagged. This will make the identification of defaulters much easier. The project also incorporates a - machine learning integrates information management system, which will continue to improve over time. The project will also track the PANs being quoted in transactions and tally these with tax filings. This will ensure that those with multiple PANs are caught.

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As a part of the 360-degree vision fundamental of the project, one of the data sources for the ITD will be social media. By checking the social media platforms of those under investigation, a mismatch between the individual's declared income and their social media posts will cause them to be flagged.

The system also profiles all transactions by an individual, such as immovable property, jewellery and vehicles in a systematic and easily identifiable manner for the ITD. It will also rank evaders based on the amount of tax that can be recovered. This will allow the ITD to go after the biggest targets first.

It was also revealed that ML models can be run to identify certain spending patterns to narrow down the focus of the ITD. For example, individuals who bought more than a set number of houses or jewellery that does not go along with their declared incomes, they will be flagged.

Conclusion

The introduction of this system marks the entry of an age-old institution in India into a data-driven approach. The model, which is based on Britain's 'Connect' system, will put India in the same league as nations such as Belgium, Canada and Australia. These countries are already using big data to keep an eye on their taxpayers.

The move will also result in the curbing of the black economy and widespread corruption seen in the country today. The large amount of black money which is processed by multiple high-ranking government officials and tech millionaires will be prone to an eagle-eyed view of the taxman.

 



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