Tax Administration and its fight

against informality -
The Indian Method

Vinay Sinha
Director, Foreign Tax & Tax Research Division
Department of Revenue
Ministry of Finance
Government of India
 Informal Economy - Background
• What is the informal economy
– Activity Income generation not reported to direct tax
authorities.
– Most of the transactions are in cash/outside the banking channels
– There is a quid-pro-quo to both the parties transacting in the
informal economy.

• Estimates of informal economy

– Various studies anywhere between 16% - 62%

• Approaches to target informal economy

– Broadening the tax base (Tax Payer Services)
– Deepening the tax base (Data Analysis)
 Simplified tax regimes for small taxpayers
• Maintenance of books of accounts not mandatory
– Gross Sales of business is less than approx 14K USD
– Gross receipts of professionals less than approx 1.4K USD

• Presumptive taxation @ 8%
– Gross Sales of business less than approx 0.3 Million USD
– Gross receipts of professional less than approx 42K USD

• Presumptive taxation @ 6%
– Gross Sales of business less than approx 0.3 Million USD
– All transactions digital

• Around 83.9% of returns filed for FY 2018-19 under the simplified

regime opted for presumptive taxation
 Simplified tax regimes for small taxpayers

• 100% e-filing of return on portal, Processing at a dedicated

Centralised Processing Centre, Priority Refund directly into the
bank account. Zero human interface.
– Way forward – Prefilled Income Tax return to be populated only to be
confirmed by the taxpayer.

• Penalties/Prosecution for non-filing are waived.

• Refunds up to INR 5,000 (approx 70 USD) without any adjustment

against outstanding demand, if any.

• More than a quarter Billion nudge messages in Financial Year

2018-19
– timely submission of ITRs and other important requirements.
 Control strategies of the retail sector
• Special incentives under presumptive taxation for digital transactions
(6% instead of 8%)

• Tax Return Preparer Scheme

– Applicable to all residents where audit report is not be filed. (Close to 4000
fully-functional TRPs)

• E-Sahyog
– online mechanism to resolve mismatches in Income-tax returns without
visiting the Income Tax Office.

• Exemption from Withholding Taxes

– Interest, Contract payment, Commission, Rent and Fees for professional
services

• Concessional tax rates for start-ups

 Improvements in registration and
communication procedures
• Insight Compliance Portal
– Queries/Requests to be uploaded on the web site
• Zero human interface

• Tax identification number (PAN) and national

identification number made interchangeable for
filing of income tax returns

• e-PAN equivalent to PAN

– Next stage is to issue PAN on real time basis
 Improvements in registration and
communication procedures
• All notices/orders of the department to be issued electronically and will include a
Document Identification Number to increase transparency and cut down fraud.

• E-assessment
– 100% digitally authenticated communication between taxpayer and department

• Compliance Management Central Processing Centre (CMCPC)

– leveraging campaign management approach (consisting of emails, SMS, reminders,
outbound calls, letters) to support voluntary compliance and resolution of compliance
issues.

• Aayakar Seva Kendra (ASK) (Approx 300 ASK Centres)

• Human face of the Income Tax Department through participation in Trade Fairs,
Tableaus on special occasions.

• Regular publications thanking the taxpayers and reminding them of their duties.
Data Warehousing & Business Intelligence

• More and more third party data being collected

– Reporting Portal

• Effective use of EoI and AEoI Data

• GSTN

• Risk Assessment
Thank You