In India, tax collection is one of the most important and difficult tasks that is carried out by the Income Tax Department in India. In fact, among developing countries, India has one of the lowest rates of tax collection in the world and there is scope for a lot of improvement in terms of tax collection and to facilitate this, various measures are taken including Challan 280 to help improve tax collection.
Looking at our statistics, the current situation looks quite bleak. India’s tax-to-GDP ratio is only 16.6%, much below the applicable rate for the average emerging market economy, which usually average around 21%. This rate is lower than even half of the average ratio for OECD (Organization for Economic Co-operation and Development) nations which is currently have an average tax to GDP ratio of 34%. While one of the key factor behind this apparently dismal performance in India is the exclusion of a wide base of the population from the taxation slabs through various exemptions, the other and more worrisome, is the less than responsible behavior of the eligible taxpayers.
Every citizen should remember that payment of correct and timely taxes is a very crucial element for a country’s progress. The money so collected by the government is used for development of infrastructure, education, health, defense and similar crucial sectors.
Sources of Tax Collection
There are three ways of tax collection:
- Payments made voluntarily by persons with the designated banks. For instance – Self-Assessment Tax and Advance Tax.
- Taxes deducted at source (TDS) on behalf of the taxpayer by the person making the payment to him/her.
- Taxes collected at source (TCS) on behalf of the taxpayer at the time of incurring an expense.