Only 1 percent of the Indian population pays income tax and declares earnings above the non-taxable income. Only 5.78 crore income tax returns were filed by individual taxpayers for the financial year 2018-19 till February 2020. Out of this, only 1.46 crore individual taxpayers filed returns declaring income above Rs 5 lakh, Anurag Singh Thakur, MoS, Ministry of Finance, said in a reply to a question in Lok Sabha. Individual taxpayers with income up to Rs 5 lakh are not required to pay any income tax from Assessment Year 2020-21 onwards. Tax evasion is at the core of the low tax base in the country.
The government said that it has taken several steps such as searches and seizures, surveys, inquiries, assessment of income, levy of taxes, penalties, and filing of prosecution complaints in criminal courts, for the timely detection of tax evasion. It added with the increase in electronic form of information being available, such as Computer Assisted Scrutiny Selection (CASS); Non-filers Monitoring System (NMS); and Income Tax Business Application (ITBA), the I-T Department has developed a wide range of non–intrusive methods for detecting tax evasion.
Mandatory quoting of PAN for various cash transactions, restrictions on cash transaction of Rs 2 lakh or more; levy of TDS at 2 percent on the amount of cash withdrawal by a person exceeding Rs 1 crore from one or more accounts; and prohibiting taxpayers from accepting loans or deposits of more than Rs 20,000 in cash are the other steps that the government has placed to curb tax evasion. However, despite the efforts, the number of cases of tax evasion is at elevated levels.
Meanwhile, not only the direct tax but indirect tax is also struggling with the incidents of tax evasion. During the period of July 2017 to August 2020, there were 906 cases booked against exporters for fraudulent claims of GST refund, according to the parliament papers. In these cases, the quantum of tax evasion was Rs 2,551.15 crore, out of which, only Rs 293 crore could be recovered.