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.