Tax Evasion in India

What is Tax Evasion?

• Tax evasion is an activity that aims to hide, understate or falsely report income to reduce your tax liability. It comes under Tax fraud which consists not paying tax, paying less than what is due, not declaring cash transactions, fabricating income, falsifying deductions without proof etc.
• Tax evasion is important because it is considered illegal in India and leads to severe penalties. The penalty for not disclosing income ranges from 100% - 300% of the tax. But, you should also not ignore the fact that taxes are an essential source of revenue for the government.

The difference with Tax Avoidance

• Tax Avoidance means avoiding paying taxes by lawfully complying with the provisions.
• But Tax evasion is to avoid paying taxes through fraud and unfair practices.
• If one aims to avoid paying taxes, they can use the loopholes in the provisions to their advantage, but if you choose to evade paying taxes, you must employ unlawful practices with minified intentions.
• Tax Avoidance is a means of Tax planning performed before tax liabilities arise and Tax Evasion is a blatant fraud performed after the tax liabilities arise.

How do people evade tax?

• Through smuggling instead of paying state taxes, EXIM taxes and Customs duties. It is a punishable act under Indian law.
• Filing incorrect income tax returns like understating your income and overstating deductions.
• Making fake financial statements and fake documents.
• Keeping money outside India.
• Bribing the officials.

Why do people evade tax?

• When the tax rates are high compared to their incomes.
• When tax authorities are not vigilant and law enforcement is not strict, people can evade taxes since there are no consequences.
• Personality traits and Greed in society.
• The habit of accumulation in society.

Impact of Tax evasion on the Indian Economy

• Less Revenue for the Government leading to Fiscal Deficit.
• Generation of Black Money and Gresham’s Law. Gresham's law is a monetary principle stating that "bad money drives out good." This increases inequality in the society.
• When Black money circulates in the market, it leads to high inflation in the market.
• The inflated prices of Real Estate are an example of this.
• India’s Black Money is stashed in tax havens abroad like Swiss Bank etc.

Government Efforts to stop Tax Evasion and Black Money

• The government of India formed a Special Investigation Team (SIT) to look into Black Money issues ordered by Supreme Court.
• The Income Tax Department has implemented a tax evasion reward scheme, which compensates those who report tax avoidance.
• India and the United States recently signed an agreement to prevent Americans from evading taxes through Indian financial institutions.
• Persons in possession of black money can invest in special bonds under the Special Bearer Bond Scheme (Immunities and Exemptions Act, 1981).
• The government raised the tax bracket, lowered the deduction rate, and tightened lawful tax avoidance techniques.
• Joining the Multilateral Competent Authority Agreement in Respect of Automatic Exchange of Information (AEOI) and having an information-sharing arrangement with the United States under the Foreign Account Tax Compliance Act (FATCA) are examples of global initiatives to combat tax evasion and black money.
• Both India and Switzerland have agreed to speed up work on the Automatic Exchange of Information (AEOI) in order to make it possible by 2018.
• Lok Sabha passed the Benami Transaction Bill 2015, which was primarily an anti-black money policy with the goal of seizing unknown property and prosecuting people involved in such activities.
• The Government has established the Tax Administration Reform Commission to undertake fundamental reforms to tax concerns in order to simplify and streamline tax procedures.

Way Forward and Conclusion

• If India really wants to avoid tax evasion, then it must lower tax rates, bring Direct Taxes Code Bill, create an efficient tax administration, increase awareness and simplify the procedures to create a well-defined tax structure for the long term.

PM Kisan Samman Nidhi Yojana

About PM Kisan Samman Nidhi Yojana

• PM KISAN is an initiative by the Government of India to which all farmers will get up to. 6,000 per year as minimum income support.
• The Scheme is in effect from 01.12.2018. The scheme was officially launched on 24th February 2019. It was announced in the 2019 Interim Budget.
• The scheme has a cost? 75,000 crore per annum. It is a new Central Sector Scheme.

History of PM KISAN Scheme The scheme was first conceived and implemented by Government of Telangana as the Rythu Bandhu scheme, where a certain amount is given directly to eligible farmers. It was praised by many economists, even World Bank. Many economist suggested that this type of investment support is better than farm loan waivers. Hence Government of India implemented it as a Nationwide project. For 2018–2019, Rs. 20,000 crores were allocated under this scheme. For the years 2019–2020, the scheme has been revised to benefit nearly 2 crores more farmers; for which the coverage of the scheme is increased to nearly 14.5 crore beneficiaries, by allocating Rs. 87,217.50 crores by the Central Government.

Objectives of PM KISAN Yojana

• With a view to providing income support to all land-holding eligible farmer families, the Government has launched PM-KISAN. The revised Scheme is expected to cover around 2 crores more farmers, increasing the coverage of PM-KISAN to around 14.5 crore beneficiaries.
• The scheme aims to supplement the financial needs of the farmers in procuring various inputs to ensure proper crop health and appropriate yields, commensurate with the anticipated farm income.
• Earlier, under the scheme, the financial benefit has been provided to all Small and Marginal landholder farmer families with total cultivable holding up to 2 hectares with a benefit of Rs.6000 per annum per family payable in 3 equal installments, every 4 months.

Who are Not eligible? The following categories of beneficiaries of higher economic status shall not be eligible for benefit under the scheme: All Institutional Landholders. Farmer families in which one or more of its members belong to the following categories Former and present holders of constitutional posts Former and present Ministers/ State Ministers and former/present Members of LokSabha/ RajyaSabha/ State Legislative Assemblies/ State Legislative Councils, former and present Mayors of Municipal Corporations, former and present Chairpersons of District Panchayats. All serving or retired officers and employees of Central/ State Government Ministries /Offices/Departments and its field units Central or State PSEs and Attached offices /Autonomous Institutions under Government as well as regular employees of the Local Bodies (Excluding Multi Tasking Staff /Class IV/Group D employees) All superannuated/retired pensioners whose monthly pension is Rs.10,000/-or more (Excluding Multi Tasking Staff / Class IV/Group D employees) of the above category All Persons who paid Income Tax in the last assessment year Professionals like Doctors, Engineers, Lawyers, Chartered Accountants, and Architects registered with Professional bodies and carry out professions by undertaking practices.

Other Features of PM Kisan Samman Nidhi Yojna

• Definition of the family for the Scheme is husband, wife and minor children.
• The entire responsibility of identification of beneficiary farmer families rests with the State / UT Governments.
• The fund is directly transferred (DBT) to the bank accounts of the beneficiaries.
• The Scheme was initially meant for Small and Marginal Farmers but later extended to all landholding farmers from 1.06.2019.
• Farmers covered under the Exclusion Criteria of the Operational Guidelines are not eligible for the benefit of the Scheme (Given above).
• For enrollment, the farmer is required to approach the local patwari/revenue officer / Nodal Officer (PM-Kisan) nominated by the State Government.
• The Common Service Centres (CSCs) have also been authorized to do registration of the farmers for the Scheme upon payment of fees.
• Farmers can also do their self-registration through the Farmers Corner in the portal.
• Farmers can also edit their names in the PM Kisan Nidhi Samman yojana database as per their Aadhaar database/card through the Farmers Corner in the portal.
• Farmers can also know the status of their payment through the Farmers Corner in the portal.

Critical Analysis of PM KISAN Yojana

• The direct transfer of funds is an advantage of this scheme. On December 25, 2020, in the presence of PM Narendra Modi, Rs.18,000 crores were directly transferred to the bank accounts of 9 crore farmers
• All the records related to farmers is registered officially on a digital platform which has made the registration and fund transfer easy. The digitalised records have brought about a new start to this welfare scheme
• It helps in increasing the liquidity of farmers, modernization of agriculture and doubling farmers’ income.
• As on 22nd February 2022, benefits under the PM Kisan scheme have been provided to about 11.78 Crore farmers and funds amounting to Rs1.82 lakh crore in various instalments have been released to the eligible beneficiaries of this scheme across India. Out of which Rs. 1.29 lakh crore has been released during the current Covid 19 pandemic period.
• Self-registration Mechanism: Process of Self-registration of beneficiaries has been made simple and easy through mobile app, PM KISAN portal and walk-ins via Common Service Centers in order to give the maximum benefit to the farmers.
• Enhanced Recovery Mechanism: In case of ineligible beneficiary, recovery mechanism has been made very smooth and transparent which doesn’t require a Demand Draft or physical cheque to be submitted by the state. The process includes auto transfer from the state nodal department’s account to the central government account which made this process very efficient and less time-consuming.
• Grievance Redressal& Helpdesk: In order to address the issues and problems faced by the beneficiaries, a holistic grievance redressal mechanism has been envisaged which involves setting up of a central Project Management Unit of PM KisanSammanNidhiYojana at the Centre which performs the overall coordination between all the stakeholders to streamline the processes. A centralized helpdesk has also been introduced in order to support the beneficiaries regarding any issues faced during the registration process or for any other query. Through this initiative, about 11.34 lakh grievances have been received from farmers and more than 10.92 lakh grievances have been redressed by the concerned state authorities.
• Physical Verification Module: In order to maintain the authenticity and validity of the scheme, a mandatory physical verification of 5% beneficiary every year is being done as per the provisions laid down in the scheme. With the help of Physical Verification Module, now the selection of beneficiary for physical verification has been totally automated and no manual intervention is required. A separate module has been introduced for the validation of 10% of the beneficiaries after the payment for the last trimester on 14th May 2021.
• Income Tax verification: The beneficiary database in this scheme is being regularly validated with the income tax payee database in order to have an audited and authenticated user base.
• Demographic Aadhar authentication: To make this whole process more transparent and authenticated, Aadhar validation has been made compulsory. As of now 11.20 Crores beneficiaries data is Aadhar seeded in the scheme.

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