In an exclusive interaction with Adlin Pertishya Jebaraj, correspondent of Finance Outlook Magazine, Aashish Mishra, Partner - Cyber Security, Nangia NXT shares the current rise of digital taxation and how the technology helping business organisation in reshaping tax compliance and fraud detection by automating routine tasks, highlighting hidden risks, and providing smarter, faster decisions for both taxpayers and tax authorities. Aashish Mishra is a cybersecurity professional with wide-ranging technical knowledge across various domains and industry sectors. With over 20 years of experience in different domains of cybersecurity, he is proficient in offensive security, vulnerability management, cyber strategy and compliance, data protection & privacy and BCP/DR. 

How do you see the rise of digital taxation tools working in businesses with cybersecurity? 

To increase efficiency, accuracy, and compliance in business operations digital taxation tools such as automated tax software, online filing, and cloud-based reporting (like GSTN, e-filling, e-invoicing) are getting adopted by businesses, resulting in exposure to cybersecurity risks considering data sensitivity.  Businesses must secure sensitive data like PAN, financial records, and cross-border transactions, moves across APIs, third-party integrations, and cloud environments; cybersecurity becomes intertwined from taxation processes. 

Organisations need to implement essential security measures, including employee awareness, multi factor authentication, strong encryption, role-based access controls, incident response plan, adoption of AI and blockchain to automate fraud detection and ensure data integrity. Businesses must adhere to security by design, least privilege, segregation of duties principles, and zero-trust access models in their tax systems to ensure compliance and resilience. 

What are the common mistakes companies make concerning tax data security?  

Common errors in financial data security includes storing sensitive data in unencrypted form on a local or shared drive, use of weak authentication methods and bad access controls where vendors or employees may end up with unnecessary access privileges when it is not appropriately managed through role-based access controls. Organizations do not always consider the risks of third parties (outsourced accounting company or SaaS provider) and do not treat tax and financial data as an important asset. The utilization of outdated software and systems which are not updated also add vulnerabilities to the problem and the lack of awareness of the employees and the proper incident response plan leaves the institutions without sufficient means to effectively deal with the breach. 

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How are AI applications being used in tax compliance and fraud detection?  

AI covers various fronts, including machine and structured learning help organisations in reshaping tax compliance and fraud detection by automating routine tasks, highlighting hidden risks, and providing smarter, faster decisions for both taxpayers and tax authorities. AI can be utilised to streamline tax calculations, returns filing, along with bookkeeping. Furthermore, AI applications are being used for automating compliance by validating e-invoices, GST filings and flagging anomalies. Also to note, AI applications are being used for real time monitoring, flagging suspicious transactions and filing behaviour. These applications can forecast tax player non-compliance and help authorities to act on that. 

Explain the mandatory requirements of the government in cybersecurity audits for tax compliance purposes?  

Along with government cyber security audits for tax compliance annually, CERT-in has also recently released a cybersecurity audit guidelines framework that raises the bar for compliance, governance, and resilience. 

CERT-In Audit Guidelines apply to entities handling sensitive financial/tax data, mandates cybersecurity audits including annual vulnerability assessments, penetration testing, network security audits, source code, compliance reviews, and application, cloud, and AI systems security testing. Audits are conducted independent firms, those empanelled by CERT-In and must follow globally accepted industry standard methodologies rather than only tool-based approaches. 

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What’s the single technological shift that will transform cybersecurity in taxation within a decade? 

While AI can be used for real-time fraud detection, adaptive compliance monitoring, and predictive insights, blockchain can help guarantee the integrity of tax records. Advanced encryption and robust data protection can be accomplished with quantum computing, enhancing the resistance of tax systems against online attacks.