Filing ITR with AI? Here's what ChatGPT and Claude can — and can't — do for taxpayers

With the July 31 deadline for filing Income Tax Returns (ITRs) fast approaching, more taxpayers are experimenting with generative AI tools such as ChatGPT and Claude to understand tax rules, calculate liabilities and prepare draft returns. While AI can simplify tax filing and answer complex queries in seconds, experts caution that it should be viewed as a support tool rather than a substitute for human verification.

The debate gained momentum after tax filing platform TaxBuddy shared on social media the experience of a software engineer who relied on Claude to prepare his ITR-2 return. Although the taxpayer was able to complete the filing process himself, the experience highlighted both the strengths and limitations of using generic AI for tax compliance.

AI helped, but...

According to TaxBuddy, the engineer chose not to hire a chartered accountant because he believed his tax return was relatively straightforward. Instead, he uploaded his tax documents to Claude, entered his personal details and asked the AI assistant to calculate his taxes and explain each step of the filing process.

However, AI stopped at providing guidance. The taxpayer still had to manually review the calculations, enter the information on the Income Tax Department's e-filing portal, validate every schedule and submit the return himself. The entire process reportedly took around six hours.

The case illustrates that while AI can make tax concepts easier to understand, it cannot replace the taxpayer's responsibility to verify every detail before filing.

One outdated rule

During the filing process, Claude reportedly advised the taxpayer to fill Schedule AL (Assets and Liabilities) in his ITR-2.

The recommendation, however, was outdated. For Assessment Year (AY) 2026-27, the threshold for mandatory disclosure under Schedule AL has been increased to ₹1 crore. Fortunately, the taxpayer was aware of the revised rule and corrected the error before filing the return.

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The incident underscores a key limitation of large language models: while they often provide confident and detailed responses, they may occasionally rely on outdated information or miss recent regulatory changes.

Where AI can add value

For many taxpayers, AI remains a useful assistant. It can explain tax provisions in plain language, help users understand deductions and exemptions, compare different ITR forms, explain capital gains taxation and answer general tax-related questions instantly. It can also help organise financial information and identify documents needed for filing.

These capabilities can be particularly helpful for first-time filers or those with relatively simple tax returns.

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Accuracy still matters

Preparing an income tax return involves more than just computing tax. Taxpayers must select the correct ITR form, reconcile details with the Annual Information Statement (AIS) and Taxpayer Information Summary (TIS), correctly report capital gains, disclose all applicable schedules and comply with the latest tax rules.

A missed disclosure, incorrect schedule or outdated interpretation could result in a defective return, delayed refund or even a notice from the Income Tax Department.

As AI adoption grows, taxpayers are likely to use these tools more frequently during tax season. However, the final responsibility for the accuracy of an ITR continues to rest with the taxpayer. Before submitting a return, users should cross-check AI-generated suggestions with the latest Income Tax Department guidelines or use specialised tax-filing platforms that incorporate current tax rules and validation checks.

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