The High-Level Committee on regulatory reforms has proposed deeper integration between the Income Tax Department and the Ministry of Corporate Affairs (MCA) for a DigiLocker for businesses, a move aimed at reducing compliance burden while also helping authorities detect discrepancies across filings, improve tax recovery and curb under-reporting or misreporting of income, sources said.
The proposal, which could build on the government’s Entity Locker platform launched in January 2025, forms part of the recommendations made by the committee headed by NITI Aayog member Rajiv Gauba to create a more seamless digital compliance ecosystem for businesses.
“One of the recommendations relates to MCA and Income Tax working together for greater integration in a DigiLocker-type framework for businesses. The objective is to ensure that information and documents that are already available with one government department do not have to be repeatedly submitted by businesses to multiple agencies,” a government source told Moneycontrol.
In the DigiLocker for businesses, documents such as incorporation records, PAN-linked information and other government-issued records can be stored, accessed and shared digitally. If Income Tax and MCA systems are integrated, information submitted to one department could be digitally verified and accessed by the other, reducing duplication while enabling authorities to identify inconsistencies across filings more efficiently.
The recommendation is also understood to be linked to the government’s broader push towards PAN-based integration of databases. PAN has already been identified as a common business identifier across several digital systems and sources said greater interoperability between departments could reduce duplication while enabling more effective compliance monitoring.
At present, companies file tax returns and related disclosures with the Income Tax Department, while financial statements, annual returns and other corporate filings are submitted to MCA.
“The High-Level Committee on Regulatory Reforms has examined a number of measures aimed at reducing compliance burden and improving ease of doing business. Among the ideas discussed is the creation of a more seamless digital architecture for sharing verified business records across government systems,” the official said.
“Today, companies often provide similar information to different authorities in different formats. The effort is to move towards a framework where authenticated records can be accessed digitally, with appropriate safeguards and permissions, rather than requiring fresh submissions every time,” the official added.
According to the official, the broader principle behind the recommendation is “submit once, use many times”.
“If information is already available with the Income Tax Department or MCA, businesses should not have to repeatedly furnish the same documents for various regulatory and compliance purposes,” the official said.
Detect tax under-reporting
Experts said the proposal could also strengthen tax administration by enabling automatic cross-verification of information filed with different government agencies.
“This proposal is likely to help tax authorities detect discrepancies more effectively and curb under-reporting, but its success depends on how deeply the systems are integrated and whether authenticated documents are automatically cross-verified,” an tax expert, told Moneycontrol.
According to him, integration between MCA and income tax databases could enable automatic cross-checking of corporate filings against income tax returns, helping authorities identify mismatches in reported revenue, profits and director-related disclosures.
Improve tax recovery
One immediate benefit could be improved tax recovery. Padhan cited cases where companies seek strike-off despite having outstanding tax liabilities.
“Earlier, a company could file for strike-off even when there was an outstanding income tax demand. The Income Tax Department often had to approach the National Company Law Tribunal for revival of the company to recover the tax demand. Integration between the systems can help identify such cases before strike-off approvals, improving tax recovery while reducing litigation, court burden and administrative costs,” he said.
The proposal could build on the government’s Entity Locker platform, launched in January 2025 as a digital repository for businesses and other entities. Often described as a DigiLocker equivalent for organisations, Entity Locker enables companies to securely store, access and share verified documents issued by government agencies and regulators.
Due diligence
He said authenticated documents available through such a framework could also improve due diligence by banks, lenders and regulatory authorities.
“Bankers and other authorities would be able to undertake due diligence from a single source of verified information. Any false representation or misstatement can be detected more easily,” he said.
However, he cautioned that the effectiveness of the framework would depend on the extent of automation and coverage.
“Without mandatory automated cross-verification, some discrepancies may still go undetected. The system will be most successful if it eventually covers all forms of business entities, including MSMEs, trusts, societies and partnerships, and not just companies,” he said.
