+91 99506 24499
+91 99506 24499
|
FAQs
|
The activities related to tax evasion have a significant level of adverse impact on the economic growth and stability of a country. In the historical data of India, it is clear that tax evasion is a general aspect of the economy. These evasion-related activities are becoming significant hurdles for the country in the growth and stability of its economy. It adversely affects the revenue sources of the government and decreases the amount of tax collection. The outcome of this effect is resulting in the limitation of the budget for infrastructure and public welfare projects of the government. The government of India implemented various initiatives and measures in the process of detecting these tax evasions. The tax authority of India developed strategies related to adopting new advanced technologies, reforming the regulations, and other collaborative measures. In this study, the initiatives taken by the government of India will be explored to evaluate the effectiveness of them in combating tax evasion. It will evaluate the significant strategies incorporated by the government such as Goods and Service Tax (GST), black money and Imposition of Tax Act 2015, the Demonetization Act 2016, the digital payment system known as UPI, and the adoption of new technologies. The study provided a brief introduction about the taxation system and tax evasions in India. This also mentions the measures and initiatives adopted and implemented by the government of India in detecting and reducing tax evasions. All the objectives of this research mentioned in the study and the interpretation of the collected secondary data have been presented as per the objectives. |
The activities related to tax evasion can be critical for the fiscal health of any country. In the case of India, the critical aspect is more noticeable because it is adversely affecting the overall economy of the country. Tax evasion plays a significant role in reducing the amount of the governments.revenue generation which is significantly important for the country's economic or social stability and development (Alam, 2021). These activities of tax evasion also known as legal avoidance by any individual taxpayer or any organization are significant challenges for the government. Avoidance of tax is a significant hurdle for economic growth, increases the inequality in income (Jain, 2021), and decreases the trust of the public in the government. Because of these adverse effects of tax evasion, the government of India developed and implemented various strategies and initiatives for countering the evasions. The incorporation of advanced technologies and reforms in the regulatory policies significantly improved the efficiency of the tax evasion detection systems. There are some significant aspects or measures taken by the government in this improvement such as Goods and Service Tax (GST), digital payment system known as UPI, implementation of AI, and incorporation of AIS in the tax filing (Alonso et al. 2023). These initiatives are also being enhanced by the agreements related to international cooperation. The key example of this corporation is the automatic exchange of information (AEOI) system that favors the government in identifying tax evasions outside of the country (Lesage et al. 2020). The study will evaluate the way these strategies are effective in countering tax evasion, and the aspects that still have scope for improvement. The study aims to understand the commitment of the Indian government to countering tax evasion and maintaining the stability of the economy.
In the process of this study, secondary qualitative research methods have been utilized to gather information on the measures and initiatives taken by the government to counter tax evasion activities. This method generally utilizes quantitative data that already exists or is provided by other researchers or authorities in the process of accomplishing the objectives of the research. The methods of this methodology become valuable in the process of utilizing the full potential of existing data or information (Chatfield, 2020). There are some considerable aspects to adopting this methodology in any research or study. Information or data should be collected from recent and relevant sources. Ethical issues such as consent of the original author or researcher, transparency in the collection process, and providing credits to the authors or researchers should be considered. It involves analyzing information and data from various reliable and relevant sources such as released reports of government, academic articles, legislative documents, and reputed sources of news. This will provide importance to the advancements that happened in the previous 5 years related to significant transformations and new technologies. Secondary qualitative methodology generally involves various analysis strategies such as content analysis, document analysis, comparative analysis, and case studies conducted by other researchers.
Interpretation
Implemented initiatives for determining tax evasions by the government of India
Goods and Service Tax (GST): The system of goods and service tax optimized the indirect taxation system by developing a unified framework for tax collection. This initiative significantly reduced the gaps and opportunities related to tax evasion (Agarwal et al. 2022). The incorporation of advanced technologies such as a digital invoicing system also known as e-invoicing and the implementation of a GST network (GSTN) that monitors the tax transactions in real-time is a key factor of this system (Agarwal, 2020). These technologies increase the transparency of the taxation process and accountability of the taxpayers. However, there are significant issues or challenges present in the system such as fake invoicing and reporting reduced amounts of sales require more strict regulations and systems.
Demonetisation of Notes 2016 and 2023: On November 8, 2016, the government demonetised Rs 500 and Rs 1000 notes from circulation. This favored the government in recollecting the lost revenue from tax collection. The process of exchanging old notes with new ones significantly contributed to identifying tax evasion and recovering black money (Gautam et al. 2021). In the. year 2023, the government of India again demonetized their recently released Rs 2000 notes to provide another push to the initiative. The process of demonetization also brought new taxpayers to the government. For example, in the financial year of 2016-17 and 2017-18, the incorporation of demonetization created 9.1 million and 12.8 million new taxpayers for the government (isec.ac.in).
Initiatives based on advanced technologies and techniques
AI and Data Analytics: The IT department in the tax authority of India incorporates advanced technologies such as Artificial Intelligence and Data Analytics in the process of detecting tax evasion. The system favors the authorities to identify similar patterns and abnormalities in the data of tax filing (Kaur et al. 2024). These technological analytics collect data from various sources for tracking high-value transactions. The data sets such as financial transactions, tax filings and third- party information significantly contributes in the identification of suspicious patterns. Cross referencing of data from different sources such as bank, stock exchanges and other departments of government also contributes in determining hidden income and discrepancies. The models of machine learning estimates potential tax evasions based on historical data.
Digitalization: The government of India adopted various digitization initiatives in the process of detecting and countering tax evasion. Initiatives such as linking Aadhar and PAN cards, digital filing of tax returns also known as e-filing, digitized payment system also known as UPI and tax records (Chourasiya and Saini, 2024). These systems reduce human intervention in the process of tax collection and filing systems and decrease the opportunities or gaps related to tax evasion. The IT department of Tax authority also conducts face less assessments derived by AI where cases flagged by AI rectified with out any human intervention. The department also conducts life style analysis based on social media such as ownership of luxury items. The department also incorporates text mining and NLP techniques to analyze tax filings, email communications other textual data for the detection of frauds.
AIS system in tax filing: It is a complete view of information that is outlined as the system of 26AS. The process allows the taxpayers to provide feedback about the information projected in AIS. The system optimizes the digital interface of the tax filing system and increases the user- friendliness of the page (incometax.gov.in, 2024). This optimized and easy-to-use system also favors the authority to increase the number of tax filings and spread awareness about tax compliance.
Issues and Challenges with Recommendations
After all the advancements and initiatives implemented by the government of India, there are still some significant issues and loopholes in the system.
Significant gaps in regulations: most of the tax evasion-related activities are done by utilizing the Gaps or loopholes in the regulatory system. The evaders exploited these gaps or loopholes to legalize their tax evasions (Kurauone et al 2021). Continuous reforms in these regulations are required to tackle these evasions and promote awareness of tax compliance in the population.
Compliance-related issues: This kind of issue is significantly visible in small businesses that do not follow the GST regulations provided by the government. This happens due to a lack of awareness and knowledge about the benefits and applications of this law. Initiatives such as awareness campaigns and building capacity for these small businesses to have the benefits of GST filing. This will favor the government to develop voluntary compliance in these small businesses.
Technological limitations: The implementation of Artificial Intelligence and Data analytic technologies significantly contributes to improving the efficiency of tax evasion detection systems. However, the accuracy rate of these systems significantly depends on the quality and reliability of collected data sources. The tax authority has provided a significant amount of importance to the reliability and credibility of the data collection sources
In the above study, it is clear that the government of India took various initiatives and strategies for reducing tax evasion-related activities and increasing awareness of tax regulations in the general population of the country. The initiatives are in some way proven effective for the country but there are still some issues and loopholes present in the tax regulations and collection system. In the process of reducing these loopholes, the government of India has to develop further initiatives and strategies.
Download
Download
Download
Download
Download XML
