The rapid evolution of technology has an unprecedented opportunity to revolutionize India’s indirect taxation system. This paper explores how data analytics and artificial intelligence (AI) can be harnessed to transform the efficiency, transparency and effectiveness of tax administration in India. The study delves into the current Challenges faced by the taxation system, such as tax evasion, compliance burdens, and inefficiencies in tax collection. By integrating advanced Data analytics and AI, the research demonstrates potential solutions that can enhance decision-making, predict tax fraud, streamline processes, and improve taxpayer experience. Furthermore, the paper provides a comprehensive analysis of the existing infrastructure and suggests a roadmap for integrating these technologies, especially under project ADVAIT by the Government of India into the taxation system. The study delves into specific applications, such as predictive analytics under Project ADVAIT for fraud detection and AI-driven automation for tax administration and reducing tax evasion and increasing the tax revenue by the government. In recent years, the complexity and scale of India’s tax infrastructure have posed significant Challenges to efficiency, compliance and transparency. Through this lens, the paper envisions a more agile, efficient, and taxpayer-friendly system, ultimately contributing to a more robust economic framework in India. In this research secondary data has been used for key findings and result analysis. The overall research was done after going through many different research based on data analytics and AI used in taxation systems, especially in India. In this research, we find after adopting modern technologies, tax evasion and fraud has been reduced and government tax revenue has been increased.