Income Tax Department looks for all means to collect maximum tax. Total tax revenue target for current financial year is Rs 12.35 lac crore and 1/5 of this target is from Income Tax. Income Tax uses the following strategies to coerce individuals and companies to pay their due tax.
Imposition of penalty
Income Tax Department may impose penalty for concealment or inaccurate reporting of income to avoid paying income tax. Penalty is a big deterrent for anyone to avoid paying income tax. Penalty clause has been covered in Section 271 of Income Tax Act 1961.
One of the short coming of this clause is that only financial penalty is imposed for not paying income tax and this clause could be made stronger if imprisonment could be included in penalties.
Rewarding highest tax payers
News is always flooded with Bollywood actors and actresses paying highest income tax. Even upscale properties show case their dwellers include highest tax payers “he had the unique distinction of being the highest individual income taxpayer in the country at the age of 28“. Now, government is planning to felicitate top income tax payers and make paying income tax a status symbol.
The strategy is good, however, the top tax payers would already be celebrities and may not be too keen to get another celebrity status. It may be encouraging if government rewards some lower ranking individuals who have been paying their income tax well.
Making tax filing simpler
Earlier, filling up income tax return was a complicated process and many people especially small business men would not fill tax for that complexity. Introduction of simple tax filing procedures such as Saral, Sahaj, e-filing etc is a step in right direction.
Voluntary Disclosure Scheme
Such schemes from time to time give individuals and corporations a chance to correct their earlier mistake. Other strategies with this strategy may make a perfect harmony.
However, one of the shortcoming for this scheme is that of rewarding highest tax payers as well “You shouldn’t be surprised if one wing awards a taxpayer and the other raids him.”
Tax Deducted at Source
TDS is one of the reason Income Tax Department is able to collect so much tax revenue from salaried individuals. TDS gives one a piece of mind and does not give a chance to individual to spend the money that is really his/her tax liability.
Conclusion
I believe Income Tax Department has the right tools to bring maximum people to gambit of income tax and earn maximum tax revenue. I hope that money is spent well for development of all tax payers. Please chime in if you would like to add any more strategies adopted by Income Tax Department.
