Issues associated with taxation system in India

“Generous” government policy
Tax exemption raj that benefited the richer private sector.
India has a relatively large informal/unorganized sector, and tax evasion is more rampant in the informal sector compare to the organized sector.
Low per capita income, high poverty, keeps tax collections low.
Out of 25 crore households in India, 15 crores belong to the agricultural sector which is exempted from taxes.
A parallel economy of unaccounted incomes and expenditures exists which goes untaxed.
India has one of the highest numbers of disputes between tax administration and taxpayers, with the lowest proportion of recovery of tax arrears.
The actual number of people who pay tax is lower because of those who report zero tax liabilities.