Hyderabad: Amid the growing use of artificial intelligence in tax administration, the state commercial taxes department has imposed strict safeguards on the use of AI tools by its officials, making them personally accountable for any unauthorised disclosure of taxpayer information through such platforms.In circular No. 1/2026, the department allowed the use of AI for generic research, drafting and administrative tasks, but underscored that taxpayer confidentiality, data security and independent decision-making by officers cannot be compromised for convenience.
The guidelines prohibit officers and staff from typing, pasting, uploading, scanning, photographing, dictating, transcribing or otherwise transmitting taxpayer-related information to any public or commercial AI tool, chatbot, generative AI platform, document analyser, summariser, translation or transcription service, or cloud-based analytical software.Such platforms may be used for taxpayer-related information only if they have been expressly authorised in writing by the commissioner of commercial taxes or the Telangana govt.The move comes at a time when the department is increasingly deploying AI-driven systems for taxpayer monitoring, risk assessment, and scrutiny. While AI is being leveraged to detect anomalies and improve tax administration, the circular seeks to ensure that sensitive taxpayer data does not flow into unauthorised external platforms during the process.The department has also cautioned officials against relying on AI-generated outputs as a substitute for their own judgement.Officials remain responsible for independently examining facts, interpreting the relevant tax laws and arriving at decisions based on their own assessment.The circular makes it clear that responsibility for compliance rests with individual officers. It warns that any unauthorised sharing, disclosure or transmission of taxpayer information through AI tools or other third party platforms could attract penal action, reinforcing accountability as the department expands the use of technology in tax administration.
