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Project Insight

Project Insight is an initiative by the Income-Tax Department to mine big data from social media to scrutinize potential tax evaders. For example if you flaunt photos or videos of your recent exotic vacation trip or of a new expensive car that costs an arm on Facebook, Twitter or Instagram the IT Department will check whether it matches with your Income declared.

It is built over a cost of about 1,000 crore rupees ($156 million), 'Project Insight' will complement the world's largest biometric identity database and India's most ambitious tax overhaul as policy makers try to get more people to pay up.

Countries including Belgium, Canada and Australia are already using big data to unearth tax evasion that may have gone undetected without technology. India's efforts resemble the U.K.'s 'Connect,' which is estimated to have cost some 100 million pounds. Since its inception in 2010, it has prevented the loss of 4.1 billion pounds ($5.4 billion) in revenue and the number of criminal prosecutions has risen to 1,165 from 165 a year, the London-based Institute of Financial Accountants said in a December 2016 report.

The Central Board of Direct Taxes gets a lot of info through annual information return and third party reporting but it is not humanly possible for them to look through and process all that data. Project Insight will help taxmen pinpoint potential offenders.

L&T Infotech is the private firm that will be assisting the I-T Department through profiling of taxpayers and flagging high-risk individuals, using cutting edge tech. Compliance will rise 30 percent to 40 percent during the first phase of the project. During this time all existing data -- including credit card spends, property and stock investments, cash purchases and deposits -- will be migrated to the new system and a central team will send postal or email blasts to prod residents to file tax declarations. There will be no physical interaction.

In the second phase data analytics will mine, clean and process the information. Individual spending profiles will be created and inquiries will be more targeted. In the last phase, advanced systems will be used to predict future defaults and flag risks.

Some analysts recommend that the government use its tools for tax forecasting. Data analytics could show how much business has slumped in a certain town following a flood, for example, which would help authorities better assess aid requirements as well as predict local revenues and plan finances.

The scope of the project has also led to concerns in a country where the government has repeatedly told the Supreme Court it doesn't consider privacy to be an absolute right. The OECD studied 21 countries that use technology to detect tax fraud and said in its report that while such methods offer a win-win by making compliance cheaper as well as boosting revenue, they must be accompanied by legislative measures and taxpayer consultation.