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August 1, 2016

Tax Payers Should Be Rewarded to Boost Tax Collection

As only 4% of total population that pay taxes in India, certain relief in form of tax credits should be given to these tax payers as a reward. A continued focus on widening of the taxpayer base is also important to increase compliance.


India is a country where people try and avoid taxes. Despite several efforts from the successive government since 1947, India is still struggling to boost tax collections. The condition of tax returns in India is such, that many monetarily successful citizens are able to avoid tax payments. To be honest, tax avoidance in India has been and continues to be a global issue. Though many administrations have introduced the carrot and stick approach for boosting tax collections, it has failed to make an impact on the success rate.

As compared to the US, India’s total amount of personal tax receipts for 2015 was only $40 billion against their $1400 billion. Though a lot of people might argue that the difference in the number is due to distinct income levels of both the countries, but truth be told, factors that can maximize tax collections in India are beyond the income levels.

As seen from India’s number, 4% of the total population pays taxes for the remaining 96. These 4% tax payers are the unfortunate few who bear the tax burden. To ensure that people pay their taxes with honesty, the Income Tax Return form should be shared as a strong personal financial enabler. This will help the tax payers’ financial life have a strong financial status in the form of tax return.

The Government should also add in some social benefits for tax payers, in form of tax credits where they can claim certain refunds against few conditions. ITR should provide a tool that benefits the middle and upper middle class section of the society, in a way that is similar to Aadhar, that provides direct benefits to the poor. If such successive steps are undertaken by the Government, inspired by tax routine of the developed world, people might be able to see taxes in a good light.

Source : Livemint