Only less than 3% of Indians
pay income tax as per the India’s finance minister. He told that 2.89 percent of the Indian
population i.e. about 36 million people filed Income taxes. This is in contrast to U.S. as there 45% of
the population pays the taxes. Thus,
large chunk of our masses enjoy the income taxes paid
by these people. Why this is so?
1. The tax system is very
complicated and not user friendly. The
ones who pay income tax also have to struggle hard in order to calculate and
file their taxes. The correct filing may
not be there in all the cases. Some of
these individuals have to depend on the professionals in this field as the
Income Tax act has a lot to confuse people and confound much information. Over
the years inefficiency has been crept into the tax system. This is very much camouflaged and thus
helping the corrupt means of tax babus in the Government. Situations are
improving as the transparency is being brought in through electronic
means. Simplification process does had
some positive impact.
2. Indians earning taxable income i.e. below
200,000 rupees annually or 16667 rupees per month may be majority in
number. Such persons have been exempt
from paying the income tax. Indians have
among themselves many people even below the poverty line. But to such individuals, Governments give the
collected tax amounts by way of many schemes.
It is different story that the entire amount do not reach these
unfortunate lots.
3. Farm income is also exempt from paying the
Income tax. There are many farmers who
have much more taxable income, but due to this policy of the Government, their
affluence is used for themselves only.
They may even be hiding the other incomes like that of rental and
interest incomes with their agricultural incomes.
4. Many industrialists and
businessmen particularly traders who do have some farm land or their known or
relatives have farm lands in rural areas also hide their real incomes and show
as agriculture incomes if they buy some high value goods like property, cars
etc.
5. Although small businessmen
in many markets/sectors, big or small, do earn a lot i.e. much more than
200,000 annual incomes, but they do not fall in income tax net as India being a
very big people base and there are not matching IT loyal officers to catch such
traders/manufacturers.
6. Many traders/manufacturers
are being helped by corrupt tax officials as there are many means created by these
officials themselves which helps these individuals not to pay a penny to the IT
Department or pay just a small petty amount.
Such individual entrepreneurs do maintain dual book system.
7. Underground persons don’t
share their wealth/incomes with the authorities. So they do not pay such taxes, instead they
collect their self framed tax rules from poor and rich people. It is happening in many parts of the country
that if some one buys a luxury item, one has to pay some amount to these
individuals in order to live with less day to day problems from these
underground individuals. Thieves, sex workers, gamblers, smugglers etc i.e.
illegal activities which may have big sum incomes annually can’t pay by
declaring such incomes. Jail inmates
also do not pay as they earn a small amount which is known to the authorities.
8. In India, we have many
political parties and thus have many people who are dependent on these parties
for their earnings. Quite a few may be
earning from these parties which may attract taxation laws of the land. But very few may be paying the Government
direct taxes.
9. Majority of tax payers are
those who earn their income as salary either from Government or from Private sources
such as Public or Private Limited Companies etc. Such individuals do attract provision of entire
cut of Income taxes as Tax Deducted at Source (TDS) or at least 10% cut of
TDS. High worth individuals who deposit
their wealth as Fixed Deposits etc. also attract TDS. Such individuals do file
their returns and pay Income Taxes. Even
the proprietors of private companies do earn their salaries also pay the direct
taxes on their salaries.
10. Majority of people pay
indirect taxes, if they are supposed to pay.
It is worth considering that the Governments inbuilt the direct taxes
into a form of indirect tax. In any case
they already have a system in place of collecting indirect taxes and make it a
strong system so that everyone who is collecting the indirect taxes whether it
is sales tax or service tax or excise duties or import duties or estate taxes
etc. deposit the amount. No doubt the
system of indirect taxes also need more strengthening as we see that revenue
generated by indirect sources is much less than that from Direct sources. In fact there is need of consolidation of
various types of taxes. Then such
individuals would be very few to deal with for revenue collection. Problem of less number of tax payers would be
solved and tax payers base would be very wide.
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