Till date all government awareness programmes for education of tax payers adopt the stick approach like making them aware of penalties and prosecution under the Income tax Act, 1961.This approach may not yield the desired results.

There appears to be a need to change the way of educating the tax payers.

The tax payer needs to be treated like a customer for the Income tax department as suggested in Tax Administration Reform Commission report by Mr. Shome earlier. The new age tax payers as well as older assessees need to be told the benefits of paying the taxes honestly, the impact it will have on them.

The Government should organize tax awareness programmes for the assessees/tax payers to educate them about the benefits of paying the taxes honestly and the need to discharge their statutory obligations in a proper & timely manner.


There is a need for educating tax payers about the benefits that will directly accrue to them if taxes are paid honestly. Some of the suggestions in this respect are as follows:

a) Honest payment of taxes will lead to a better credit rating for the assessees which will help them in getting various loans at much cheaper rates and with relative ease.

Such loans provided by financial institutions in the organized sector will impact their personal as well as professional life. Their business will grow if they are able to get working capital loans as well as loans for purchasing specific assets. Similarly, they may get housing loans and have better residential facilities. All this would be possible only if they declare their true income in Income Tax Returns and pay taxes thereon. Every loan provider looks at the ITR first to gauge the paying capacity of the assessee.

b) Cash and other incentives may be provided for compliances related to Income taxes. Eg 1% or any specified amount may be provided as a cash incentive to Tax deductors as well tax collectors in case of 100% accuracy in timely depositing of taxes and filing of TDS/TCS returns thereof.

c) Government should organize tax awareness programmes for the assessees/tax payers to educate them about the benefits of paying the taxes honestly and the need to discharge their statutory obligations in a proper & timely manner

Source-  ICAI Pre-Budget Memorandum–2018 (Direct Taxes and International Tax)

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June 2021