Why Do So Few People Pay Income Tax In India?

All work and no play made Jack a sad man. Similarly, all free things and no contribution sent the economy toppling down. So reminiscent of what people expect and what they give.

It is the financial duty of every person as a citizen of their state to pay a certain percentage to the country. This percentage helps the country develop and grow economically and financially by leaps and bounds. Paying your income tax is one duty you should never shrug away from.

What Then Is Income Tax?

Income tax is a government-levied tax on the percentage of income on all individual and businesses to be directly paid to the government. Income tax is a direct tax within the country. It is a compulsion for every citizen of the country be it a salaried or business to pay or file their Income tax returns every financial year.

What Is Income Tax Used For?

Income tax is routed towards the government funds to finance various government schemes for subsequent developments and facilities like hospitals, schools, roads, etc., also towards the salaries of the government bodies of both the central and the state.

Other than funding government administrations, income tax is also considered as a monetary balance towards equal financial distribution among the population needs. It works towards buffering the effects of economic cycles.

What Are The Different Categories Of Income Tax?

Taxes fall into two categories, direct tax that is Income tax that each and every earning person has to pay whether salaried, business, gains and profits. Service tax, VAT and the newly introduced Goods and Service Tax (GST) are indirect taxes.

In accordance with the Income Tax Act, 1961, the categories that fall into the income tax ceiling are -

·         Salaried Income Groups

·         Income accumulated from properties and Real estates

·         Professional and Business category

·         Benefits from Capital

·         Income from other sources

Why Do You Need To File Income Tax?

·         It is mandatory by law to pay your taxes. Not doing so would incur huge losses.

·         Necessary to pay so that you can claim a refund or carry a loss to the next annual term forward.

·         Helps to procure speedy loans as it helps decide your paying capacity.

·         Helps you procure credits cards more easily.

·         You contribute your share to your country.  

·         Helps to register your property easier.

·         Necessary for obtaining a visa.

·         Pay it on time to avoid paying huge late fees.

Why Do So Few People Pay Income Tax In India?

People try to evade pay Income tax for many reasons. Literacy may be one of the reasons, but at the same time, many categories of people have different views.

People feel ethically entitled to keep their hard earned money since they slogged for it and think it was not a gift to be given away. Perhaps they do not understand the consequence of tax evasion. They do not even feel they owe the government. 

People may not even be f eeling the Need to Pay Income Tax because it is legally earned.

Housewives or mother save their gold or cash for future events. Again here it is legal but not accounted for.

Many people feel better evading paying their income tax as they are under the belief that the country rarely does anything for them. They are not so happy with the miserable failure of the government towards the infrastructure and maintenance of the country. Some are of the view that if the government is lenient to farmers categorizing them as one type and waiver of taxes is granted to them then why not I. 

View Of The Wage Workers

Categories like the maids, auto drivers and such daily wage-workers also feel the need for a tax waiver. They also save their legal money by keeping the money at home for a future event.

Keeping it in the bank would amount to taxation, fee towards lower bank balance maintenance etc. not realizing the consequences of evasion. These lower wage-workers are also under the impression that the money received for working isn’t technically income.

Most think, “Am I not entitled to keep my salary for myself since the government has the right to tax gains or profits and not hard earned wages? I have engaged my labour in equal exchange for my fair wage. No profit no gain.”

Voluntary Giving Of Taxes

Another feeling that people have is filing a return and paying taxes is ‘Voluntary’.  People do not realize that ‘Voluntary’ means that an individual has the right to determine the tax liability by filing the appropriate forms it does not mean evading the tax entirely.

Individuals simply are frustrated to see the malfunctioning of the government system some seek evidence to see the improvements in substandard schools, roads, hospitals, etc., and hence evade taxes as a challenge. But this is not a reason to evade taxes, as eventually, the consequences will have to be borne by the tax evader. 


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