Chapter - 7 Perception of Income Tax Assessees and Authorities

CHAPTER – 7
PERCEPTION OF INCOME TAX ASSESSEES

AND AUTHORITIES
CHAPTER – 7
PERCEPTION OF INCOME TAX ASSESSEES AND

AUTHORITIES
7.1 INTRODUCTION
The study aims to examine the perceptions of Income tax assessees and
authorities. In order to understand the perception of assessees and authorities on
income tax system and administration, questionnaires were administered in separate
sets. Studying the perception of assessees and authorities brings out the attitude
towards tax policy and tax administration. Tax payers of a country are greatly affected
by tax policy and administration in a given period of time. A good tax system and
administration should aim at raising tax revenue with least difficulties and grievances
to tax payers and thereby it achieves the objectives of the government. Income tax
system and administration has been subjected to amendments and reforms with the
aim of making the taxation system more equitable, flexible, assessee-friendly,
revenue-neutral and globally investment friendly.
Perception refers to the respondents’ attitude towards taxation system, various

issues of income tax system, income tax reforms and income tax administration. Their
perception represents the beliefs, ideas, values, emotions, experiences and their
orientation towards the tax system.
Generally, when any reform is made to tax system, assessees try to understand
as to how the tax reform affects them. The business persons try to analyze the impact
of reforms on his business. It is observed that whenever any major reforms are made
in the taxation, business persons try to change their business models. For every
government action towards tax reforms, there are good number of reactions and
rearrangements are made so that their affairs are least affected. The rearrangements
may take the form of tax avoidance or tax evasion which is against to the intent of the
government in reforming the tax system. However, for assessees such as salaried
people, rearrangement is least possible, but try to make alteration in their saving and
investments. Any arrangements by the assessees are based on the knowledge of the
income tax system, administration and reforms made in it. The essence of it is that the
assessees are aware of the system and administration and they can assess the expected
role of the government. Assessees, possibly, gather information from various sources
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such as friends, peers, media and government announcements. They keep watching
the government’s move and get, at least, the minimum knowledge about the tax
system. Their opinions on the tax system are formed on the basis of the above sources
of tax knowledge.
However, the nature and the extent of knowledge depends on various factors
such as academic status, occupation, level of income, political orientation, and the
level of exposure of the assessee. The perception of the tax payers also depends on the
historical and cultural background, his past experiences with the system, influence of
behavior of others on him, perception of experts who render taxation services to him,
and opinion of policy makers. The study of the perception of respondents would help
us to understand the problem of the study in a more detailed version, in turn it help us
to predict the behavior of taxpayer.
This chapter presents the analysis of perception of Income Tax Assessees and
Income Tax Authorities. The presentation is made in this chapter under three different
sections. Section – I exhibit the demographic profile of income tax assessees, Section-
II analyses the perceptions of Income tax Assessees regarding income tax system,
simplification and rationalization measures, difficulties in compliance, tax evasion,
tax refunds, tax morale, issues in tax administration, and suggestive measures to
widen the tax-base. Section-III analyses the perception of Income Tax Authorities
regarding Human Resource Management of Income tax department, Income tax
system, simplification and rationalization measures, tax compliance, recent
development in income tax department.
The usable questionnaires were coded, data was edited and analyzed by using
Statistical package for Social Science (SPSS) version 20. The questionnaire includes
various heads and each head is composed of several statements of the variable. The
study used various statistical techniques such as descriptive statistics, Factor analysis,
Chi-square test, ANOVA, One-sample-t test, Kendall’s Coefficient of Concordance
for testing of hypothesis and drawing inference. Reliability and normality test was
conducted using Cronbach Alpha and Kolmogorov-Smirnov test of normality
respectively.
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SECTION-I
7.2 DEMOGRAPHIC PROFILE OF RESPONDENTS
Of the total 1084 respondents, individual assessees are 960 and the remaining
are artificial persons. The demographic variables of assessees include, gender, age,
education, occupation, level of annual income. However, variables such as gender,
age and education is not applicable to artificial persons- Hindu Undivided Family
firm, Firm (including Limited Liability Partnerships), Companies, Trusts and Others
(include AOP/BOI/Local Authority/Government)-and only occupation (business) and
annual income are included in the demographic variables. Respondents are in equal
number for each of the four selected Jurisdiction. The data analysis was made for
testing the hypotheses to determine any differences in the perception of assessees.
Further, for testing of hypotheses demographic variables such as occupation,
jurisdiction and Type of persons were considered. Other variables were not
considered since they do not affect the results of analysis, on the ground that Income
Tax law does not discriminate according to gender and education level.
One of the important qualities of the data analysis is to ensure the reliability of
the statements used in the questionnaire. Even after the pilot testing, a questionnaire
may fail to prove its content validity due to several factors. Therefore, reliability of
the data was posed a concern. Under split-half reliability method, an important tool
generally applied to test the internal consistency of multiple item scale is, the
coefficient alpha (α) commonly known as Cronbach alpha. The alpha coefficient
varies from 0 and 1. There is a fair reliability between the various items of a multiple
scale if the calculated alpha coefficient is above 0.6, and it is said to be strong if the
coefficient is above 0.8. Table 7.1 shows the reliability of the data of the present
study. The Cronbach Alpha for 179 items is 0.792 which ensures the high reliability
of the instrument.
Table 7.1: Reliability Statistics

Cronbach's Alpha No of Items
.792 179
Source: Primary Data
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Table 7.2 highlights the demographic variables of the respondents. Gender-
wise classification shows that the number of male respondents among the individual
assessees were 734 (76.5%) and 226 females (23.5%). Age-wise distribution of
respondents shows that 165 (17.2%) are in the age –group of below 30 years,
323(33.6%) form the majority of the respondents in the age group of 30-39 years, 207
(21.6%) are in the age group of 40-49 years, 141 (14.7%) are in the age group of 50-
59 years and 124 (12.9%) are in the age group above 60 years and above including
pensioners and senior citizens.
Distribution of respondents on the basis of level of education highlights that

222 (23.1%) of respondents are graduates, 264 (27.5%) have post-graduation degree,
260 (27.1%) respondents are having doctoral degree, and 214 (22.3%) respondents are
having professional degree (including Chartered Accountancy, Law degree, Medical
degree, Engineering etc.).
Occupation-wise distribution of respondents (table 7.2) shows that a majority

of the respondents (32.5%) are government employees followed by 279 persons
(29.1%) who are private employees, 249 persons (25.9%) are self-employed/business
persons, and 120 respondents (12.5%) are practicing professionals.
Essentially, assessees are classified on the basis of the range of declared

income in their returns. However, the respondents grouped on the basis of the level of
annual income as mentioned in their respective questionnaires. There are 348 persons
(36.2%) in the first slab group with less than `5 Lakh, followed by 322 persons
(33.5%) in the second slab respondents with income between `5 Lakh and `10 Lakh,
and 290 (30.2%) respondents who have declared income above `10 Lakh, belonging
to third slab. The assessees required to pay income tax on the basis of the level of
income at the prescribed slab rate determined in the Finance Act for the concerned
Assessment Year.
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Table 7.2: Demographic Variables of Individual Assessees
Gender
Female Male Sub-total
Count % Count % Count N%
Below 30 12 1.2% 153 15.9% 165 17.2%
30-39 85 8.9% 238 24.8% 323 33.6%
40-49 52 5.4% 155 16.1% 207 21.6%
AGE
50-59 47 4.9% 94 9.8% 141 14.7%

60 &Above 30 3.1% 94 9.8% 124 12.9%
Subtotal 226 23.5% 734 76.5% 960 100%
Up to Graduation 64 6.7% 158 16.5% 222 23.1%
of Education
Up to Post-Graduation 41 4.3% 223 23.2% 264 27.5%

Level
Up to Doctoral Degree 52 5.4% 208 21.7% 260 27.1%

Professional Degree 69 7.2% 145 15.1% 214 22.3%
Subtotal 226 23.5% 734 76.5% 960 100%
Govt. Employee 51 5.3% 261 27.2% 312 32.5%
Private Employee 65 6.8% 214 22.3% 279 29.1%
Self-Employed/
77 8.0% 172 17.9% 249 25.9%
Occupation
Business
Professional
(AUDIT/MEDICINE/ 33 3.4% 87 9.1% 120 12.5%
LEGAL/ENGG...)
Subtotal 226 23.5% 734 76.5% 960 100%
Up to 5 Lakh 62 6.5% 286 29.8% 348 36.2%
Annual Income
Up to 10 Lakh 72 7.5% 250 26.0% 322 33.5%

Level
Above 10 Lakh 92 9.6% 198 20.6% 290 30.2%

Subtotal 226 23.5% 734 76.5% 960 100%
Table 7.3 presents the cross-tabulation of Types of Persons as per Income Tax
Act and Jurisdiction. Four jurisdictions - Bengaluru, Mysuru, Hubli, and Panaji- were
selected as the sample locations. In each jurisdiction, an equal number of assessees
were selected as respondents. Apart from 240 individual assessees, six HUFs, 10
firms, and five Company, five Trusts and five other persons in each jurisdiction were
the respondents of the study. Finally, from each jurisdiction, 271 questionnaires from
the different types of persons were considered for data analysis.
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Table 7.3: Jurisdiction and Type of Persons as per IT Act, Cross-tabulation
Type of Person as per I.T Act

Total
Individual HUF FIRM COMPANY TRUSTS OTHERS
BENGALURU 240 6 10 5 5 5 271
MYSURU 240 6 10 5 5 5 271
Jurisdiction
HUBLI 240 6 10 5 5 5 271

PANAJI 240 6 10 5 5 5 271
Total 960 24 40 20 20 20 1084
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SECTION – II
PERCEPTION OF INCOME TAX ASSESSEES
7.3 Assessees’ perception on the Income Tax System in India
The study of perception of income tax assessees includes the attitude of the
assessees regarding income tax system, income tax reforms and income tax
administration. The responses of the assessees are obtained in five point Likert’s
Scale. This analysis includes various statements to study the behavior of respondents.
There are 14 statements given in the questionnaire in the first head ‘opinion on
income tax system’. Factor analysis was used for data reduction and come up with
dominating factors of income tax system in the opinion of the respondents. The
reduction of variables into meaningful factors downsizes the tedious and lengthy
analytical approaches (Cox and Cohen, 2000).
Application of Factor analysis essentially requires the measure of sampling

adequacy (Table 7.4). Sampling adequacy of the variables can be tested through the
test of Sphericity. The KMO (Kaiser Meyer Olkin) Bartlett’s test for sampling
adequacy for 14 statements is found to be adequate (0.769) and Bartlett’s test for
Sphericity is confirmed with the approximate Chi-square value 30841.125 at 91
degree of freedom, with the significance level of less than 0.05 indicating the
rejection of the hypothesis that the correlation matrix of the variables is insignificant.
This indicates that all the 14 statements are different and perfectly normally
distributed. Further, the sample size is more than three times the number of variables.
Furthermore, this test result also suggests that the factor analysis is suitable.
Table 7.4: KMO and Bartlett's Test
Kaiser-Meyer-Olkin Measure of Sampling Adequacy. .769
Approx. Chi-Square 30841.125
Bartlett's Test of Sphericity df 91
Sig. .000
Table 7.5 shows the total variance explained by 14 variables. From the table it
is found that the rotated component matrix has given four Eigen values greater than
one such as 4.978, 2.978, 2.131 and 1.418 which persist the existence of four
207
dominating factors with combined variance of 82.180 % and individual variance
35.555, 21.27, 15.223 and 10.131 % respectively.
This indicates that the four major factors equally contribute in explaining the
various perceptions of Assessees. These four factors explain 82.18% leaving only
17.82% of variables. The individual variable loadings of each factor are presented in
the following table. Factor loading was done under principal component matrix with
variable maximization of Kaiser normalization method.
Table 7.5: Total Variance Explained
Extraction Sums of Rotation Sums of Squared

Initial Eigenvalues
Comp Squared Loadings Loadings
onent % of Cumula % of Cumulati % of Cumula
Total Total Total
Variance tive % Variance ve % Variance tive %
1 4.993 35.666 35.666 4.993 35.666 35.666 4.978 35.555 35.555
2 3.109 22.207 57.874 3.109 22.207 57.874 2.978 21.271 56.826
3 2.130 15.212 73.086 2.130 15.212 73.086 2.131 15.223 72.049
4 1.273 9.094 82.180 1.273 9.094 82.180 1.418 10.131 82.180
5 .957 6.833 89.012
6 .605 4.325 93.337
7 .520 3.715 97.052
8 .280 2.002 99.055
9 .096 .689 99.744
10 .021 .153 99.897
11 .006 .043 99.940
12 .006 .040 99.980
13 .002 .015 99.995
14 .001 .005 100.000
Extraction Method: Principal Component Analysis.
It can be identified from the above table that the first factor comprises seven
variables which explains 35.55% of the variables. These factors collectively explain
the efforts of the government towards making the taxation system more effective in
achieving the socio-economic objectives. Therefore, this factor can be termed as
“Government Action”.
208
Second dominating factor comprises three variables explain 21.27% of total
variables. These variables explain that agricultural income, being exempted from tax,
is being misused by the Second dominating factor comprises three variables explain
21.27% of total variables. These variables explain that agricultural income, being
exempted from tax, is being misused by the rich income group persons to avoid tax
(Dr. Raja. J. Chelliah, 1991), and there exist the questions whether the exemptions
and special reliefs to senior citizens and also dividend distribution tax levied on
companies instead of taxing the recipients of dividend.
Table 7.6: Rotated Component Matrixa
Component
Variables
1 2 3 4
Income tax compliance procedure has been simplified over the
.947
period of time
Recent I T reforms have contributed significantly to socio-
.946
economic growth of India.
Taxation aspects are highly significant in business decision
.946
making
Income tax is a tool for achieving socio-economic equality .905
Progressive system is suitable to India .736
Tax policy is a tool for fostering growth .695
Income tax Reforms so far have been effectively changed the
.664
direction of the tax system.
Agricultural income is being used for converting black money
.992
into white.
Exemptions to senior citizens is justifiable. .989
Dividend distribution tax is justifiable. .989
Income tax provisions are in favour of rich people only. .982
Tax burden is more on middle income people than the higher
.982
income group
The present Tax rates are high for all Assessees .832
Income tax law is still complex to understand even after the
.805
reforms.
Extraction Method: Principal Component Analysis. Rotation Method: Varimax with
Kaiser Normalization.
a. Rotation converged in 4 iterations.
209
These variables explain the basic principle of horizontal equity in taxation
system. Therefore, these variables can be named as “Horizontal Equity factors”.
Task Force on Direct taxes reports as “Historically, while the top marginal rates of
taxes have been reduced, the tax liability of the middle class indeed increased. If the
full effect of the ‘Laffer Curve’ has to be realized it is not only necessary to have an
optimal enforcement strategy but also ensure that the benefits of a tax cut apply to all
classes of tax payers at the top end. This is possible and it can be achieved by
broadening the tax slabs” (Task Force on Direct Taxes, 2002).
The third factor explained by two variables with 15.22% of the total variables.
These variables explain about the taxation system that the income tax provisions are
better used by the rich people who can afford to avail the services of professionals in
reducing the tax burden. The factor also explains that the middle income group people
in India are bearing more tax burden than the higher income counterparts. This has
been proved with the fact that number of assessees and the income declared is more in
the case of assessees in the income group of `500000 to `10000005. Therefore, these
variable can be named as “Socio-economic Equity”.
The fourth factor explained by two variables with 10.13% of total variables.
These variables indicate that the income tax rates for all types of assessees are
perceived to be high. This is true when compared to the rate structure of other
countries, especially in case of corporate tax. Further, this factor tells us that income
tax system is complex to understand and difficult to comply even after the repeated
efforts of the government in reforming the tax system. This factor can be termed as
“Taxation Policy”.
Income tax assessees strongly recognize the Government efforts to make the
taxation system and they strongly believe that income tax can be used as a tool to
achieve socio-economic objectives of the government. They also agree that the reform
measures have contributed to make this tool more powerful than before. However, the
respondents opined that some critical issues such as dividend tax, exemption to senior
citizens violate the principle of horizontal equity. Moreover, there is more income tax
burden on middle income group, tax rates are still high, and the tax provisions are
difficult to understand. These force the tax payers to resort to costly professional
5
Table 6.14.3, table 6.14.4, and table 6. 14.5 chapter 6.
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advice. Hence, these issues need to be addressed and the related provisions should be
rationalized and simplified.
Hypothesis was tested to know the difference in the mean perception of

respondents. one-way Analysis of Variance (ANOVA) has been computed for this
purpose.
Hypothesis 1:
H0 : Mean perception of the respondents regarding the Income tax system is the
same
H1 : Mean perception of the respondents regarding Income tax system is different
Table 7.6(a) shows the Analysis of Variance (ANOVA) of the perception of

respondents towards the four dominating factors- Government Action, Horizontal
Equity Factor, Socio-Economic Equity and Taxation Policy- among the four groups of
respondents classified on the basis of occupation of Assessees.
In case of two factors- ‘Socio-Economic Equity’ and ‘Taxation Policy’- F

values are greater than the tabulated value of 2.60 at five per cent level of
significance. The table shows that p values in the case of these two factors are less
than 0.05 at the 1080 degree of freedom. Therefore, there is enough evidence to reject
the null hypothesis (H0). From this, it can be inferred that the mean values are because
of the chance and the respondents do have different opinion about the ‘socio-
economic equity’ factor and ‘taxation policy’.
Two groups – ‘Self-employed or business persons’ and ‘Professionals’ have

different perception about the variables of these two factors. Particularly, business
persons and professionals disagree that the tax provisions are in favour of rich people,
and they also disagree with the statement that the tax burden falls more on middle
income group. It is also to be noted that tax professionals and chartered accountants,
experienced business persons do not agree that the income tax system is still complex
to understand. This opinion is attributed to their academic background and the
experience in the system. Further, tax rates are perceived to be high for corporate
Assessees and not the slab rates for individuals.
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Table: 7.6(a): Analysis of Variance (ANOVA) of Perception of Assessees
Towards Income Tax System
Sum of Mean
Factors df F Sig.
Squares Square
Between Groups 7.685 3 2.562 2.573 .053
Government
Within Groups 1075.315 1080 .996
Action
Total 1083.000 1083
Between Groups 5.731 3 1.910 1.915 .125
Horizontal
Within Groups 1077.269 1080 .997
Equity Factor
Total 1083.000 1083
Between Groups 8.116 3 2.705 2.718 .043
Socio-Economic
Within Groups 1074.884 1080 .995
Equity
Total 1083.000 1083
Between Groups 14.496 3 4.832 4.884 .002
Taxation Policy Within Groups 1068.504 1080 .989
Total 1083.000 1083
Besides the above two factors, there is no enough evidence to reject the null
hypothesis in the case of the first two factors- ‘Government efforts’ and ‘Horizontal
equity factor’. F values are less than the tabulated value of 2.60 in these cases with the
p value greater than 0.05 in both the cases. It indicates to retain the null hypothesis.
Therefore, it can be concluded that the respondents’ mean perception towards these
two factors are the same.
The above discussion highlights that the respondents recognized the efforts of
the government. Tax payers agree that the reforms made after 2000-01 have changed
the direction of the taxation system. This can be identified that in many areas, taxation
provisions have been changed, income tax system is perceived to be an effective tool
for fostering growth and achieve socio-economic objective, ‘to some extent’ income
tax system has been simplified over the two decades. All the respondents strongly
agree that ‘income taxation system is highly significant in business decisions’
(KPMG, 2011)6. However, it is also perceived that the tax system lacks horizontal
equity and socio-economic justice. Agricultural income should be subjected to tax as
6
‘Tax Trend in Emerging India’- KPMG Survey (2011)
212
suggested by the reform committee (Dr. Raja J.Chelliah Report on Income Tax
Reforms, 1991), dividend should be taxed in the hands of recipients to ensure
horizontal equity. Exemptions and reliefs to be perceived to be rationalized and
reduced. Despite the varied opinion of the different groups of respondents, it is
strongly believed that the rates are still high, and the procedures need to be further
simplified to ease the compliance.
7.4 PERCEPTION TOWARDS RATIONALIZATION AND

SIMPLIFICATION OF INCOME TAX SYSTEM
Many studies pointed out that the Income tax system in India is complex. It is
believed that it is difficult for the Assessees to understand and apply the provisions for
compliance and also for tax planning. Reforms committees have recommended to
simplify the tax provisions and rationalize the tax rates, exemptions, incentives and
rebates etc. respondents were asked to rate the statements given under the heading
‘simplification and rationalization measures’. This part of the questions includes
nineteen statements. To identify the dominating factors and grouping of the
statements into components, factor analysis was applied. Table 7.7 shows the KMO
(Kaiser Meyer Olkin) Bartlett’s test for sampling adequacy for 19 statements is found
to be 0.912 and Bartlett’s test for Sphericity is confirmed with the approximate Chi-
square value 30715.469 at 153 degree of freedom, with the significance level of less
than 0.05. This indicates that all the 18 statements are different and perfectly normally
distributed. Further, this test result also suggests that the factor analysis is suitable for
these variables.
Kaiser-Meyer-Olkin Measure of Sampling

.912
Adequacy.
Bartlett's Test of
df 153
Sphericity
Sig. .000
Table 7.8 shows the total variance explained by 19 variables. From the
table it is found that the rotated component matrix has given four Eigen values greater
than one such as 7.794, 4.336, and 3.323 which persists the existence of three
dominating factors with combined variance of 85.847% and individual variance
213
43.298, 24.090 and 18.459 % respectively. This indicates that the three major factors
equally contribute in explaining the various perceptions of Assessees. These three
factors explain 85.847% leaving only 14.153% of variables.
Table: 7.8: Total Variance Explained

Extraction Sums of Rotation Sums of
Initial Eigenvalues
Squared Loadings Squared Loadings
Component
Cumulative
Cumulative
Cumulative
Variance
Variance
Variance
Total
Total
Total
% of
% of
% of
%
%
1 7.818 43.433 43.433 7.818 43.433 43.433 7.794 43.298 43.298
2 5.395 29.973 73.406 5.395 29.973 73.406 4.336 24.090 67.389
3 2.240 12.442 85.847 2.240 12.442 85.847 3.323 18.459 85.847
4 .615 3.418 89.265
5 .451 2.508 91.773
6 .343 1.906 93.678
7 .202 1.122 94.800
8 .175 .973 95.774
9 .151 .840 96.614
10 .135 .752 97.366
11 .115 .641 98.007
12 .088 .487 98.494
13 .074 .414 98.908
14 .053 .293 99.201
15 .043 .239 99.440
16 .040 .220 99.660
17 .036 .198 99.858
18 .026 .142 100.000
Table 7.9 presents the individual variable loadings of each factor. Factor
loading was done under principal component matrix with variable maximization of
Kaiser normalization method. It can be identified from the above table that the first
factor comprises nine variables which explains 43.298% of the variables. These
factors collectively explain the expectation of the respondents on deterrence measures
to be taken by the government to make the income tax system more effective.
Therefore, this factor can be termed as “Rationalization”.
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Component
1 2 3
Frequent amendments should be avoided .956
Surcharge and Education Cess should be discontinued after a short
.952
period.
Irrelevant tax provisions must be changed or wiped off immediately. .949
Amendments should be applicable in the future, but not from the past. .948
There should be TDS from Long term capital gain on transfer of
.943
agricultural land
Tax deductions should be made on every registration of property transfer. .935
Agricultural income in India should be taxed if it exceeds a specified
.920
threshold limit
Dividend should be taxable in the hands of recipients. .893
Further Reduction in tax rates brings better compliance .873
The age of super senior citizen should be fixed at 70 years. .959
Number of dependents should be considered in case of tax liability of
.953
individual.
All losses carried forwarded should be allowed to be set off under any
.949
head.
Number of Exemptions and Deductions should be minimized and
.949
simplified for individual Assessees’ and replaced by standard deductions.
There should be the same provisions under salary head for private, public
.731
or Government employees.
There should be ceiling on deductions instead of Minimum Alternate
.914
Tax.
There should be only two types of residential status .911
Income Tax rate for domestic companies and foreign companies should
.888
be the same.
Financial disclosure under Income Tax Act and Companies Act 2013
.832
should be the same
Extraction Method: Principal Component Analysis. Rotation Method: Varimax with Kaiser
Normalization.
215
Second dominating factor comprises five variables explain 24.090% of total
variables. This factor explains the set off and carry forward provisions to be
simplified. All losses carried forwarded should be allowed to be set off under any
head.
Currently, there are restrictions on the number of years of carry forward and
restrictions on the different heads of income against which the losses under other
heads to set off. The existing exemptions and deduction provisions should be
minimized and simplified. Alternatively, these exemptions and deductions should be
replaced by standard deductions under the head salary. Further, provisions for private,
public and Government employees should be the same under the head salary.
Respondents are strongly agreeing that the age of the super senior citizens should be
reduced to 70 years and the number of dependents should be considered while
computing the tax liability of individuals. These variables explain that the provisions
should be simplified and therefore, the component of these variables can be labelled
as ‘simplification’ factor.
The third factor with explained by two variables with 18.459 % of the total
variables. These variables explain about the assessees expectation that the provisions
under different categories should be synergized. Consequently, taxation provisions
become furthermore simplified. The respondents agree that there should be only two
types of residents, as proposed under the Direct Tax Code. The respondents find it
difficult to apply the Minimum Alternative Taxes, therefore, they expect that the
MAT should be removed. As a compensatory act, the assessees agree to oblige the
minimization and ceiling on the deductions and exemptions. This would achieve the
twin objectives of minimizing the exemptions and deductions and simplifying the
provisions, particularly for corporate assessees. It should be noted that the MAT was
introduced to restrict the companies to show the zero income. Therefore, necessary
care should be taken to ensure that the corporates would not be able to repeat the
similar tax avoidance mechanisms. Respondents also agreed for same rate of tax for
domestic companies and foreign companies. Similar rate is perceived on the rationale
of attracting foreign companies. It is also perceived that the disclosure norms under
Income Tax Act and Companies Act 2013 should be the same. Since these variables
suggest to synergize the tax provisions, it can be labelled as ‘Synergy’ factor.
216
Hypothesis 2:
H0 : Mean perception of the respondents regarding the rationalization and

simplification is the same
H1 : Mean perception of the respondents regarding the rationalization and

simplification is not the same
In order to know whether the perception is different among the different

persons as per Income Tax Act, Analysis of Variance (ANOVA) was applied. Table
7.10 indicates F values of responses for three dominating factors, ‘Rationalisation’,
‘Simplification’ and ‘Synergy’. It is found that the application of ANOVA is tenable
since the null hypothesis of homogeneity of variances at 0.05 level of significance is
not rejected.
Table 7.10: ANOVA of Perception Towards Rationalisation and Simplification
Sum of
df Mean Square F Sig.
Squares
Between Groups 9.556 5 1.911 1.919 .088
Rationalisation Within Groups 1073.444 1078 .996
Total 1083.000 1083
Between Groups 80.567 5 16.113 17.328 .000
Simplification Within Groups 1002.433 1078 .930
Total 1083.000 1083
Between Groups 9.440 5 1.888 1.896 .092
Synergy Within Groups 1073.560 1078 .996
Total 1083.000 1083
Grouping Variable: Type of Persons
The table shows that the E values are 0.088 and 0.092 with F values 1.919
and 1.896 for ‘Rationalisation’ and ‘Synergy’ respectively, which is more than 0.05,
the assumed level of significance. It shows that there is no enough evidence to reject
the null hypotheses (Ho), and inferred that the mean perception of respondents among
different persons is the same. However, the E value for ‘simplification’ factor is 0.00
which is less than 0.05, the assumed level of significance, and F value 17.328 is more
than the tabulated value. Therefore, the null hypothesis that the mean perception of
217
the respondents on the component ‘Simplification’, is rejected. It is inferred that the
different persons do not agree with the statements on simplification.
There exists a difference between Trusts and the remaining respondents as

regards statement on set off and carry forward provisions. Trusts do not agree to the
statement. Trusts do not involve in profit-oriented transactions. The remaining
persons strongly agree (mean values are above 3) that the losses should be allowed to
be adjusted against income under other heads. Similarly, HUFs do not agree that the
provisions under the head salary, should be the same for all types of employees. At
present, there are different provisions under the head salary, with respect some
allowances, perquisites, Gratuity, Encashment of Earned Leave, Commutation of
pension etc. The mean values of the perception of HUFs stands less than two. On
account of these two variances, the perception is not the same among the persons.
However, this difference can be ignored, since, the provisions do not impact the
income of these persons. The results are similar, if the ANOVA is computed with the
grouping variable-occupation. However, there exists no difference in the mean
perception across the respondents based on occupation. It should be noted that
Jurisdiction-wise analysis indicates that the mean perception is not the same in case of
‘Simplification’ and ‘Synergy’. The mean values of perception are above three in all
the jurisdictions. It can be concluded from the analysis of the components under this
category that majority of the respondents believe that the income tax system would be
more effective and Assessee friendly, more compliant, if these changes are effected.
7.5 PERCEPTION TOWARDS THE MAJOR DIFFICULTIES IN TAX

COMPLIANCE
Assessees experience the difficulties connected with the compliance. The
statements on the component ‘major difficulties in compliance’ explain the key
challenges. In order to reduce 11 statements under this category, factor analysis was
applied. Table 7.11 shows the sampling adequacy norms and normality is not violated
and the variables are suitable for factor analysis.
218
Table: 7.11: KMO and Bartlett's Test
Sig. .000
Table 7.12 shows the reduced two factors with the cumulative Eigen values of
78.53% and individual 46.731 % and 31.8 % respectively for two dominating factors.
Two major factors were identified (7.13). Assessee required to be aware of the time
limit, important documents, procedure for claiming exemptions and deductions, and
also statutory compliance under Income Tax Act.
Table: 7.12: Total Variance Explained

Initial Eigenvalues
Component
Cumulative
Cumulative
Cumulative
Variance
Variance
Variance
Total
Total
Total
% of
% of
% of
%
%
1 5.178 47.070 47.070 5.178 47.070 47.070 5.140 46.731 46.731
2 3.461 31.463 78.533 3.461 31.463 78.533 3.498 31.801 78.533
3 .796 7.235 85.768
4 .430 3.907 89.675
5 .259 2.352 92.027
6 .238 2.163 94.190
7 .208 1.888 96.078
8 .167 1.514 97.593
9 .138 1.255 98.848
10 .078 .711 99.558
11 .049 .442 100.000
Assessee needs to know the consequences of non-compliance. Globally, many
countries adopt tax payers’ education and motivation programme for making
assessees more compliant. Appealed cases may be prolonged on account of non-
compliance/timely compliance. These factors are grouped under one category on the
basis of the responses with 46.73% and these are labelled as ‘Responsibility factors’
since it is the duty of the tax payers to comply with the norms.
219
Table: 7.13: Rotated Component Matrixa
Component
Variables of major difficulties on compliance 1 2
I could not produce the required documents properly to claim exemptions and
.968
deductions.
I find it difficult to file the tax returns within the prescribed time limit .959
Assessee is penalized if the deductor commits any mistakes in TDS
.954
procedures.
I am not aware of Tax payer education and motivation programme of IT
.932
Department for voluntary compliance
Appealed cases are pending for long period. .884
Higher TDS rate in absence of PAN is not justifiable. .847
Requirement of accountant’s certificate in audit cases is a burden on
.907
Assessees
Arbitrary penalty due to discretionary powers of authorities. .906
Tax credit mismatch exist between actual TDS & TRACES TDS u/s 26AS .860
E-filing of IT return and quarterly TDS returns are difficult .847
Differential tax liability due to inclusion of income on which lower TDS rate
.611
applied and 30% tax calculated while filing the returns.
Normalization.
The second factor portrays the discriminating result of the non-compliance. It

shows that the tax payers feel pinch on account of this treatment and found the
mismatch between actual TDS and TDS as per 26AS. Tax payers are worry about
auditor’s certificates in audit cases, processing TDS returns are difficult, and on
arbitrary penalty provisions. This factor is labelled as ‘Differentiation’.
Hypothesis 3:
H0 : Mean perception of the respondents towards difficulties in compliance is the

same.
H1 : Mean perception of the respondents on the difficulties in compliance is not the

same.
220
To know the presence of equality of means of perception, ANOVA was
applied since the test of homogeneity of variances (table 7.14) allowed us as the E
value in both the dominating factors is more than 0.05 the assumed level of
significance.
Table 7.14: Test of Homogeneity of Variances
Levene Statistic df1 df2 Sig.

Responsibility Factor .438 3 1080 .726
Differentiation .545 3 1080 .651
Table 7.15 shows the Analysis of Variances of two dominating factors with
the grouping variable-occupation. Results are the same with the other independent
variables as the grouping variables. However, there exist jurisdiction-wise variances.
Respondents in Hubli and Panaji jurisdiction differ with that of the respondents of
Bengaluru and Mysuru jurisdiction. This variance may be attributed to the differences
in the level of knowledge and awareness.
Table 7.15: ANOVA
Sum of Squares df Mean Square F Sig.

Between Groups 2.437 3 .812 .812 .487
Responsibility Within Groups 1080.563 1080 1.001
Total 1083.000 1083
Between Groups 4.984 3 1.661 1.664 .173
Differentiation Within Groups 1078.016 1080 .998
Total 1083.000 1083
The perception of Bengaluru and Mysuru respondents on the ‘difficulty’ is

different from that of the other two jurisdictions. This reveals that the respondents of
these jurisdiction assume less difficulty than the other two. From this, it can be
suggested that the income tax department has to enhance the tax payers’ education
and motivation, training and work-shop to deductors etc. to overcome the difficulties
faced by the tax payers.
221
7.6 PERCEPTION ON THE REASONS FOR RESORTING TO
PROFESSIONAL ADVICE
Tax payers find it difficult to comply with the tax rules and procedures due to
varied reasons. Statements show the reasons for resorting to tax professionals/
chartered accountants. Respondents were asked to rank the reasons with five Likert
Scale Strongly disagree to Strongly Agree coding from 1 to 5. In this case, lower rank
is assigned to strongly disagree and higher rank is assigned to Strongly Agree.
Table: 7.16: Frequency distribution of Reasons for Professional Advice
Strongly Strongly
Variables Disagree Neutral Agree Total
Disagree Agree
I seek professional
50 143 222 254 351 1020
Guidance due to
(4.9) (14.02) (21.76) (24.9) (34.4) (100)
complexity of tax law
I Seek guidance due to
9 26 93 558 334 1020
Lack of transparency in tax
(0.88) (2.6) (9.12) (54.71) (32.75) (100)
administration
Unable to understand the
49 95 226 416 234 1020
frequent changes in tax law
(4.8) (9.31) (22.16) (40.78) (22.94) (100)
and rules.
Discourteous behavior of
57 35 353 242 333 1020
tax authorities towards tax
(5.59) (3.43) (34.61) (23.73) (32.65) (100)
payers
Mistakes can be avoided
70 81 210 315 344 1020
and tax liability can be
(6.86) (7.94) (20.59) (30.88) (33.73) (100)
minimized
Cost of professional advice
81 163 185 417 174 1020
is lower than that of the risk
(7.94) (15.98) (18.14) (40.88) (17.06) (100)
of non-compliance.
Note: figures in parenthesis are percentages
Table 7.16 shows the frequency distribution of ranks assigned by the

respondents on each of the statements on reasons for professional advice. The Table
shows that the respondents ranked high values by agreeing and strongly agreeing the
reasons-tax payers seek professional advice due to complexity of tax law (59.3%),
222
lack of transparency in tax administration (86.85%), problems caused due to frequent
changes in tax law and rules (63.72%), discourteous behavior of tax authorities tax
payers (56.38%), to avoid the mistakes (64.61%), and the cost of professional advice
is lesser than the risk of non-compliance (57.94%).
Hypothesis 4:
H0 : The perception of assessees regarding professional advice is the same.
H1 : The perception of assessees regarding professional advice is not the same.
Table: 7.17: Descriptive Statistics of Reasons for Professional Advice
Std.
Variables N Mean
Deviation
I seek professional Guidance due to complexity of tax law 1020 3.70 1.214
I Seek guidance due to Lack of transparency in tax
1020 4.19 .700
administration
Unable to understand the frequent changes in tax law and rules. 1020 3.53 1.096
Discourteous behavior of tax authorities towards tax payers 1020 3.74 1.117
Mistakes can be avoided and tax liability can be minimized 1020 3.77 1.194
Cost of professional advice is lower than that of the risk of non-
1020 3.44 1.099
compliance.
For testing of hypothesis that there is no significant difference in the mean

perception of the respondents, One-Way ANOVA was used. Since the data does not
violate the Homogeneity (P value 0.845) and normality assumptions it is found that
the ANOVA is tenable. Table 7.18 highlights the F value and the corresponding
E values of all the attributes which is not less than 0.05 (E >0.05), the F value (1.640)
is not greater than the tabular value. This indicates that there is not enough evidence
to reject the null hypothesis (H0), that the perception of respondents regarding reasons
for resorting to professional advice remains the same. This indicates that the null
hypothesis that there is no significant difference among the respondents on the
reasons for professional advice is not rejected. From this it can be inferred that the tax
payers’ perception is the same on the reasons for professional advice.
223
Table 7.18: ANOVA of Reasons Professional Advice

Between Groups 1.000 3 .333 1.640 .179
Within Groups 206.513 1016 .203
Total 207.513 1019
Analysis of variance across the different occupation shows that there is no

significant difference in the perception across occupation of taxpayers. It can be
understood that the tax payers resort to professional advice on varied reasons
depending on the level of income, occupation and the status. Individuals resort if their
taxable income is higher, others do not. Self-employed individuals, Firms, Companies
regularly depend on professionals due to complexity of law, discourteous behavior
and lack of transparency of tax authorities. The highest mean (4.19) assigned to the
statement-lack of transparency in tax administration- indicates that assessees
irrespective of their professions prefer the services of Chartered Accountants and Tax
Consultants for their tax compliance.
7.7 TAX MORALE AMONG THE ASSESSEES
In India, low tax morale is perceived to be one of the important reasons for tax
evasion. In the present study, respondents were given the statements to probe the level
of tax morale. The statements were designed with reverse Likert scale such as 5, 4, 3,
2, and 1 for Strongly Disagree, Disagree, Neutral, Agree, and Strongly Agree,
respectively. The scores were interpreted as high morale score, if the mean value falls
below 3, and as low morale if the mean values are above 3.
Table 7.19 shows the frequency distribution of the responses for the
statements on tax morale. These statements focused on the attributes such as tax
avoidance and evasion, non-compliancy, indifferent attitude of the income tax
assessees towards the tax payment. The statements are carefully designed to probe the
level of tax morale of the respondents. It is observed from the table that 54% of the
respondents do not agree, 25% of the respondents agree and 21 % are neither agree
nor disagree to the statement ‘To avoid paying higher taxes, it is better not to disclose
entire earnings’. 23% disagree, 51% agree and 26% are undecided about the statement
on the Voluntary disclosure scheme recently offered by the Income tax department as
amnesty scheme.
224
Table 7.19: Frequency distribution of statements on Tax Morale
Strongly
Disagree Neutral Agree Strongly
Statements Disagree Total
(4) (3) (2) Agree (1)
(5)
To avoid paying higher 151 432 226 183 92 1084
taxes, it is better not to
(14) (40) (21) (17) (8) (100)
disclose entire earnings.
The recent disclosure
46 201 281 370 186 1084
scheme of the CBDT will
be a failure.(question set (4) (19) (26) (34) (17) (100)
before IDS)
Nothing wrong in claiming 36 190 302 216 340 1084
exemptions/deductions
(3) (18) (28) (20) (31) (100)
though not eligible.
Non-deductible expenditure
138 130 212 371 233 1084
claimed as legitimate
expenditure should be (13) (12) (20) (34) (21) (100)
allowed.
Disclosing my income in
40 102 194 463 285 1084
the non-assessees account
saves my income from tax (4) (9) (18) (43) (26) (100)
liability.
There is a difference 25 59 274 413 313 1084
between my professional
(2) (5) (25) (38) (29) (100)
income earned and declared.
People are generally
51 126 287 447 173 1084
dishonest in paying taxes,
so, nothing wrong in (5) (12) (26) (41) (16) (100)
avoiding taxes.
132 435 230 195 92 1084
I consider that Payment of
tax is my obligation (12) (40) (21) (18) (8) (100)
65 159 266 339 255 1084
Payment of tax in time is
not my duty. (6) (15) (25) (31) (24) (100)
41 133 264 408 238 1084
It is unfair to pay tax on my
hard earned income. (4) (12) (24) (38) (22) (100)
Since tax is deducted at 30 173 204 418 259 1084
source, inevitably I pay tax
(3) (16) (19) (39) (24) (100)
on my income
Paying income tax is unfair 115 199 308 230 232 1084
since our money is misused
(11) (18) (28) (21) (21) (100)
by corrupt officials.
Note: Figures in parenthesis are percentages
225
Majority of the respondents do not believe that the scheme was successful.
Statements on illegitimate claim of exemption and deductions, concealing or falsely
transferring the taxable income to the account of non-tax payers account, imitating the
dishonest tax payers replicate the tax evasion behavior of the assessees. Not more than
22% of the respondents disagree to these statements, while more than 50% of the
respondents agree, and 26% are neutral. Statements such as ‘I consider that Payment
of tax is my obligation’, ‘Payment of tax in time is not my duty’, and ‘It is unfair to
pay tax on my hard earned income’ reflect the discourteous and irresponsible behavior
of the citizens, which indicate the low or lack of morality. Majority (52%) of the
respondents disagree that the payment of tax is an obligation, rather it is a duty.
However, 16% of the respondents do not agree that it is their duty. 26% of the
respondents agree to the statement ‘payment of tax is an obligation’ and 55% agree to
the statement ‘it is the duty’. Majority (60%) agree to the statement ‘it is unfair to pay
tax on our hard earned money’ which reflects the protective behavior of the
respondents. Further, majority (63%) agree to the statement ‘since tax is deducted at
source, inevitably I pay tax on my income’ indicates the helplessness of the tax payers
whose income is subjected to tax deducted at source, otherwise, it is not sure that the
Assessees pay tax honestly on their income. ‘Paying income tax is unfair since our
money is misused by corrupt officials’ signals the tax payers protective attitude
towards the corruption in the income tax department which is an important cause of
low tax morale in India. 42% agree to the statement and 29% disagree to the statement
while the remaining 28% are neutral. In the present study, combined mean score of
each of these attributes was calculated by using SPSS.
Table 7.20 shows the mean scores of the respondents against these statements.
The frequency and the mean score were grouped into four categories with the class-
interval of one. This table highlights that less than 20 % of the respondents’ tax
morale mean score is below 3. This, as per the analysis, indicates that only 20% of the
respondents do not have tax morale, whereas 709 respondents (65.4%) have mean
score between 3 to 4 being the median value as shown in the table 7.32, which means
50% of the respondents’ mean score is below 3.5 the computed median value. The
lowest mean score is 1.67 and the highest mean score is 4.5, average value of the
mean score is 3.42 with the 0.517 standard deviation. The histogram as shown in the
figure 7.1 indicates that the means score values are normally distributed across the
respondents.
226
Table 7.20: Frequency distribution of Tax Morale Mean score
Mean score Frequency Cumulative Frequency Percentage

1 to 2 7 7 0.6
2 to 3 208 215 19.2
3 to 4 709 924 65.4
4 to 5 160 1084 14.8
Total 1084 100.0
Table7.21: Tax Morale Mean Score
Valid 1084
N
Missing 0
Median 3.5000
Minimum 1.67
Maximum 4.50
25 3.0833
Percentiles 50 3.5000
75 3.7500
Figure 7.1: Histogram of the Tax morale mean score among the respondents
From the above discussion, it can be understood that the mean scores of the
respondents for the tax morale statements replete the level of tax morale among the
income tax assessees. In the present analysis, it can be identified that the level of tax
morale is above the average. However, it can be noted that the responses to the
statement do not truly reflect the morale of the tax payers. This may be biased as the
answer to the question and the reality may not be always the same. Despite the fact
that the responses are due to clever answers, the level of tax morale has been rising on
account of reform measure. It should be noted that the tax morale varies from
assessees to assessee based on various dependent variable. In this study, influence of
these independent variable on the tax morale of the tax payers is not studied, since it
requires an in depth study which requires huge amount of monetary and non-monetary
resources.
7.8 PERCEPTION REGARDING REFUND MEASURES
Reports of various committees and research studies highlighted issues

connected with the refund. There is considerable delay in refund which leads to
interest payment on the one hand and the dissatisfaction among the tax payers on the
other. Table 7.22 shows the mean and standard deviation of the attributes of Refund
measures.
Hypothesis 5:
H0 : The mean perception of refund measures is the same across four jurisdictions
(µ1= µ2 = µ3= µ4)
H1 : At least two means are not the same.
For testing of hypothesis that there is no significant difference in the mean

perception of the respondents, One-Way ANOVA was used. Since the data does not
violate the Homogeneity (P value 0.78) and normality assumptions it is found that the
ANOVA is tenable. Table 7.23 highlights the F values and the corresponding E values
of all the attributes which is not less than 0.05 (E >0.05), the F value (0.686) is not
greater than the tabular value. This indicates that there is not enough evidence to
reject the null hypothesis (H0), that the perception of respondents regarding refund
measures are the same.
228
Table 7.22: Descriptive Statistics of perception towards Refund Measures
Mini Maxi Std.
N Mean
mum mum Deviation
IT Refunds credited correctly 1084 1 5 3.76 1.065
There is no delay in refunds 1084 1 5 3.95 1.056
Interest credited on delayed refunds if any 1084 1 5 3.82 1.063
Refund Banker scheme found helpful in
1084 1 5 3.94 1.037
settling refund cases.
If there is a delay in refunds, concerned
officer should be accountable and 1084 1 5 3.94 1.052
responsible
Excess tax paid should be adjusted against
1084 1 5 3.43 1.243
next assessment year instead of refund.
Valid N (listwise) 1084
Mean values of all the items of the variable are more than 3 and the highest
mean value of 3.95 with the standard deviation of more than 1 shows that majority of
the respondents strongly agree that there is no delay in refunds. The highest standard
deviation of 1.243 for the mean value of 3.43 indicates that the majority of the
respondents strongly agree that the excess tax paid should be adjusted to next year
instead of refund.
Table 7.23: ANOVA of Perception on Refund Measures

Between Groups .805 3 .268 .494 .686
Within Groups 585.909 1080 .543
Total 586.714 1083
From the above analysis it can be inferred that the income tax Assessees face
no much difficulties. This may be attributed to the recent reform measures
implemented to address one of the important issues in the income tax administration.
However, the Assessees are also opine that the amount of refunds and the interest is
credited in case the amount involved is the small. Necessary steps should be taken by
the Income Tax Department to settle the cases at the earliest irrespective of smaller or
larger amount of refund claims and refund in case of delayed refunds.
229
7.9 PERCEPTION TOWARDS TAX EVASION
Tax evasion is one of the critical problems in India. Many studies pointed out
the causes, effects and remedial measures. In spite of repeated policy measures to
check the tax evasion and eradicate black money, the problem continues to persist in
India. Table 7.24 shows that the highest mean value of 3.93 with the corresponding
standard more than one (1.059) for the statement ‘Tax evaders can easily escape from
punishment’. The lowest mean value of 2.31 with the standard deviation of 0.908
shows that majority of the respondents disagree that the penal provisions for tax
evasion cases are strictly enforced.
Further, respondents strongly agree that ‘tax evasion is high in India’ ‘tax
evaders are protected by political intervention’ ‘Annual Information Return (AIR) and
cash flow statement schemes would help the department to detect tax evasion cases’,
and ‘the income tax department is not equipped to detect tax evasion cases’. It should,
however, be noted that not all tax evaders are protected by political intervention, but it
can be observed from many cases of tax rides and booking the cases are not convicted
and punished.
Table 7.24: Descriptive Statistics of perception regarding Tax Evasion
Std.
Statements on tax evasion N Mean
Deviation
Tax evasion is high in India. 1084 3.63 .922
Tax evaders can easily escape from punishment 1084 3.93 1.059
Annual Information Return and Cash Flow statement
1084 3.81 1.070
schemes help effectively to detect tax evasion cases
Tax evaders are protected by political intervention. 1084 3.88 1.026
Income tax department is not equipped to detect tax evasion
1084 3.85 1.090
cases.
Penal provisions for tax evasion cases are strictly enforced. 1084 2.31 .908
230
Hypothesis 6:
H0 : The mean perception on Tax evasion is the same across the jurisdictions
(µ1= µ2 = µ3= µ4)
To test the hypothesis whether the perception is the same across the
jurisdictions, One-Way ANOVA was applied. To proceed for ANOVA test, the
combined mean scores of perception of tax evasion was calculated. As the data does
not violate the homogeneity and normality assumptions (Table 7.25), ANOVA was
tenable.
Table 7.25: Test of Homogeneity of Variances of Tax Evasion
Levene Statistic df1 df2 Sig.
1.455 3 1080 .225
Table 7.26: ANOVA of Perception towards Tax Evasion

Between Groups .222 3 .074 .175 .913
Within Groups 456.958 1080 .423
Total 457.181 1083
Table 7.26 shows the p value (p > 0.05) 0.225. ANOVA (Table 7.28) shows
that the calculated F value (0.175), and p value (0.913) greater than 0.05, the assumed
level of significance. Therefore, there is no enough evidence to reject the null
hypothesis (Ho). From the analysis it can be inferred that there is no significant
difference across the jurisdiction regarding the perception of tax evasion.
7.10 REASONS FOR TAX EVASION
To know the reasons for tax evasion, respondents were asked to rank ten
different attributes of the variable ‘reasons for tax evasion in India’, from one to ten.
Lower the rank, higher is the value assigned and higher the rank lower is the value
assigned. Descriptive statistics of reasons for tax evasion presented in the table 7.27
indicates the lowest mean value of 2.64 with the standard deviation of 1.649, and the
lowest mean rank (2.64). Lower the mean value, higher is the rank. This shows that
231
the attributes with lower rank are rated as more important reasons than the other
reasons. The minimum rank assigned to items- ‘Loopholes in the law’, ‘Tax rates are
high’, ‘Multiple Taxes’, ‘Low Tax morality’ and ‘Insufficient Penalty’-are one and
maximum with six. ‘Ineffective provisions’, ‘weak administration’ and ‘Common
practice among the tax payers’ are ranked in the next order.
However, maximum rank assigned are 8 to 10, which shows that the
respondents recognized with much variance. ‘Corruption in the department’ and
‘corruption of some income tax officials’ with higher mean value and minimum and
maximum rank codes of 5 to 10, are ordered with lower preference. Of all the reasons,
these are ranked as reasons of low significance. It can be inferred that tax evasion in
India are due to Loopholes in the law, high tax rate, multiple taxes, and low tax
morality of the tax payers.
Table 7.27: Descriptive statistics of Reasons for Tax Evasion
Std. Mini Maxi Mean

Reasons for tax evasion N Mean
Deviation mum mum Rank
Low tax morality in India 1084 3.36 1.736 1 6 3.36
Tax rates are high 1084 3.07 1.285 1 7 3.07
Multiple taxes 1084 3.08 1.276 1 6 3.08
Loopholes in the law 1084 2.64 1.649 1 6 2.64
Insufficient penalty 1084 5.24 2.678 1 9 5.24
Ineffective provisions 1084 4.99 1.730 2 8 4.99
Weak administration 1084 7.36 1.990 3 10 7.36
Corruption in the income tax
1084 8.47 1.234 5 10 8.47
department in general
Corruption of some Income tax
1084 8.45 .808 6 10 8.45
officials
It is common practice among
1084 8.34 1.813 3 10 8.34
the tax payers.
To understand whether any significant agreement exist among the

respondents, Kendall’s Coefficient of Concordance was computed.
232
Hypothesis 7:
Ho : There is no significant agreement among the Assessees regarding the reasons

for tax evasion.
H1 : There exist a significant agreement among the Assessees regarding the reasons
for tax evasion.
Table 7.28: Kendall’s Coefficient of Concordance of Perception towards Tax

Evasion
N 1084
a
Kendall's W .654
Chi-Square 6377.567
df 9
Asymp. Sig. .000
a. Kendall's Coefficient of Concordance
The Kendall’s W shown in the table 7.28 is 0.654 and χ2 value of 6377.567,
and E value 0.00, the assumed level of significance. Since E value 0.00 is less than
0.05, (P<0.05) there is enough evidence to reject the null hypothesis (Ho) that there is
no significant agreement among the Assessees regarding the reasons for tax evasion,
and alternative hypothesis (H1) that there exist a significant agreement among the
assessees regarding the reasons for tax evasion. Moreover, W is 0.654 which shows
that there is moderately high level agreement on the reasons for tax evasion.
7.11 PERCEPTION TOWARDS TAX INCENTIVES
Many studies showed the anomalies of Tax incentives and it is perceived that
the tax incentives reduce the tax revenue. Respondents were asked for their agreement
or disagreement over the statements on tax incentives. Table 7.29 presents the
descriptive statistics of the perception towards Tax Incentives. The highest mean
value (4.76) reveal that majority of the respondents strongly agree that Tax incentives
creates loopholes for tax avoidance.
Minimum score of the statement is 3 and maximum 5 with the standard

deviation of less than one (.583) and the mean rank of 7.75, followed by the statement
‘discriminatory principle between the sector’, with mean value 4.20, standard
deviation 0.894, minimum rank of 2 and maximum 5 rank. The statement ‘tax
incentives makes tax law and procedure more complicated’ and ‘tax incentives lead to
233
corruption’ ‘results in litigation’ each have 3.92 mean score and the corresponding
standard deviation less than one (0.934), ‘tax incentives violate the principle of
equity’ ‘incentives are the results of lobbying’ have scored 3.84 mean and 0.923
standard deviation.
Table 7.29: Descriptive statistics of Perception towards Tax Incentives
Std. Mini Maxi Mean

N Mean
Tax incentives make tax law and
1084 3.92 .934 2 5 5.09
procedures more complicated
Tax incentives Lead to corruption 1084 3.92 .934 2 5 5.09
Tax incentives result in litigations 1084 3.92 .934 2 5 5.09
Tax incentives Create loopholes for tax
1084 4.76 .583 3 5 7.75
avoidance
It violates the principle of equity 1084 3.84 .923 2 5 4.84
It is a discriminatory principle between
1084 4.20 .894 2 5 6.20
the sectors
Incentives are the results of lobbying 1084 3.84 1.189 1 5 5.37
Incentives should be allowed only after
1084 4.00 .897 2 5 5.44
cost benefit analysis.
To be phased out after they serve the
purpose/ period for which they are 1084 3.98 .695 2 5 5.07
granted
Tax incentives should be phased out
1084 3.99 .697 2 5 5.07
completely
Mean of the statement ‘tax incentives to be allowed after cost benefit analysis’
with mean of 4.00 and standard deviation 0.897, minimum rank 2 and maximum 5,
the statement ‘To be phased out after they serve the purpose/ period for which they
are granted’ has mean value 3.98 with standard deviation 0.695 and ‘Tax incentives
should be phased out completely’ with mean value and standard deviation 3.99 and
0.697 respectively. Since all the attributes mean values are above 3 with less than one
standard deviation, (except ‘results of lobbying’), it can be inferred that the
respondent strongly agree to the statements. This reveals that income tax incentives
234
are not yet rationalized, incentives discriminate between the sectors, creates loopholes
in turn offer the tax evaders to indulge in tax evasion.
Hypothesis 8:
H0 : There is no significant agreement among the Assessees regarding the Tax

incentives.
H1 : There exist a significant agreement among the Assessees regarding the Tax
incentives.
Table 7.30: Kendall’s Coefficient of Concordance of Perception towards Tax

Incentives
N 1084
a
Kendall's W .130
Chi-Square 1270.974
df 9
Asymp. Sig. .000
In order to know whether there is any significant agreement among the

respondents, Kendall’s Coefficient of concordance was calculated. Table 7.30 shows
that Kendall’s W is 0.130, Chi-Square 1270.974, and the P value 0.000 which is less
than 0.05, there is enough evidence to reject the null hypothesis (H0) that there is no
significant agreement among the respondents towards the incentives, and alternative
hypothesis (H1), that there exists a significant agreement among the Tax payers, was
accepted.
From this, it can be concluded that the incentives should be phased out and in
case of individual Assessees, incentives should be rationalized with cost-benefit
analysis. Further, incentives should be wiped off immediately if the time period has
expired.
7.12 PERCEPTION TOWARDS ASSESSEE FRIENDLY MEASURES
It is generally believed that department is coercive rather than assessee

friendly. There are so many factors determine the assessee friendly environment and
good customer relation between Tax payers and tax Administrator. Various studies
argued that the department is not assessee friendly. In order to understand the
235
perception of Assessees on the measures taken by the department to make tax
administration assessee friendly, respondents were asked to rate the statements with
five Likert scale from strongly Agree to Strongly disagree.
The Analysis of the responses reveals that a majority of the respondents agree
(54.2%) and strongly agree (34.7%) that documentation is simple in I T procedure of
the department. It is true that the recent reforms have made documentation simple in
case of small traders and business persons, salaried employees. While 35.6% of the
respondents disagree, 29.2% are indifferent to the statement ‘TDS and notice serving
functions are coordinated’. It can be noted that this variable was removed during
extraction under rotation process of factor analysis. As regards ombudsman
institution’s effectiveness in grievance handling, a majority (44.6%) of the
respondents are indifferent, 31.6% agree, while 23.9% of the respondents disagree. A
majority (62.9%) of the respondents disagree and 9.2% of respondents strongly
disagree that Dispute settlement machinery is effective. A majority of the respondents
disagree to the statements, ‘Tax payers are assisted to apply the Tax provisions
prudently (67.8%), ‘Feedback is collected by the department on improvement
measures’ (31%), ‘Assessing officers non-discriminatory between tax payers’
(60.4%), ‘Income Tax officers act as tax facilitators and not tax enforcers’ (67.6%),
and ‘KIOSK Centers are efficient’ (30.4%). While a majority (55.5%) agree that the
recent online filing of income tax returns made the tax procedure simple.
Factor analysis was used to identify the dominating component. KMO

measure of sampling adequacy (0.701) with 45 degree of freedom, the P value 0.000
as shown in table 7.31 allowed to apply Factor analysis.

Sig. .000
236
Table 7.32 shows that three dominant factors were identified with the Eigen
values 4.591, 1.927, and 1.487 respectively. The cumulative Eigen values of 80.046
indicates that these factors explain 80.046 % leaving only 19.95% of the other
variables.

Initial Eigenvalues
Component
Cumulative
Cumulative
Cumulative
Variance
Variance
Variance
Total
Total
% of
% of
% of
Total
%
%
1 4.591 45.906 45.906 4.591 45.906 45.906 3.854 38.543 38.543
2 1.927 19.266 65.172 1.927 19.266 65.172 2.116 21.156 59.699
3 1.487 14.875 80.046 1.487 14.875 80.046 2.035 20.348 80.046
4 .972 9.715 89.761
5 .439 4.386 94.147
6 .357 3.569 97.716
7 .171 1.710 99.426
8 .038 .380 99.806
9 .012 .117 99.923
10 .008 .077 100.000
Table 7.33 shows the three factors loaded. The first component has extracted
six variables which explain the assessee friendly measures at the institutional level.
As such this component is labelled as ‘Institutional Factors’. The second component
has extracted only two variables which explain instructive and suggestive measure,
and the communication with the tax payers to understand their grievance. KIOSK
centers can be used by the assesse to complete his tax procedures on his own,
feedback collected by the officials from the tax payers and visitors can help improve
the facilities.
Therefore, this factor is labelled as ‘Facilitative factors’. The third

component has extracted two Variables which explain the procedural aspects in filing
the returns. This factor is labelled as ‘Procedural Factor’.
237
Hypothesis 9:
H0 : The mean perception on Assessee friendly measures is the same (µ1= µ2 = µ3=
µ4).
Component
Variables
1 2 3
Tax payers are assisted to apply the Tax provisions prudently. .932
Income Tax officers act as tax facilitators and not tax enforcers .929
Dispute settlement machinery is effective .906
Ombudsman institution is effective and useful for grievance handling .815
Assessing officers non-discriminatory between tax payers. .748
KIOSK Centers are efficient. .967
Feedback is collected by the department on improvement measures. .966
Recent online filing of income tax returns made tax procedure simple. .981
Documentation is simple in IT procedures of the department. .980
Normalization.
After factor analysis and extracting three dominating factors, Homogeneity of

perception across the sampling areas posed a concern. Since the data pertaining to
these variables violate the homogeneity and normality assumptions, ANOVA was not
tenable. Alternatively, Kruskal-Wallis test was conducted. The Factor scores of three
combined variables were used as dependent variables to test the hypothesis against
Jurisdiction-the grouping variable.
The Kruskal-Wallis test (Table 7.34) indicates P values for three components
at three degree of freedom, and the corresponding Chi-Square values. P values for
‘Institutional factors’ and ‘Procedural factors’ are more than 0.05, and that of
‘Facilitative factors' less than 0.05, the assumed level of significance. The null
hypothesis (H0) that the mean perception across the jurisdiction is the same, is
rejected in the case of ‘facilitative factors’, and can be inferred that the perception
towards the facilitative factors across the jurisdiction is not the same.
238
Table 7.34: Kruskal Wallis Test of Perception towards Assessee friendly
measuresa,b
Institutional Factors Facilitative Factors Procedural Factors

Chi-Square 1.334 13.960 6.264
df 3 3 3
Asymp. Sig. .721 .003 .099
a. Kruskal Wallis Test
b. Grouping Variable: JURISDICTION
Since the null hypothesis is rejected, to know the areas of differences, the
mean ranks were compared and found that there is a difference in the perception
between the jurisdictions. The mean ranks in the case of Panaji and Hubli
Jurisdictions are lower than that of Bengaluru and Mysuru jurisdiction. However, the
null hypothesis for ‘Institutional factors’ and ‘Procedural factors’ is retained since the
P values are more than 0.05, which indicates that the respondents have expressed the
same opinion about the ‘Institutional’ and ‘procedural factors’.
Income tax officers are expected to facilitate the tax payers in applying the
provisions prudently. Tax payers need advice in compliance, filing the returns,
procedures and consequences in appeal cases. Dispute settlement machinery is
expected to settle the cases early. Ombudsman institutions should be available in all
big cities and help the tax payers overcoming their grievances. It is also expected that
the Assessing Officers should be non-discriminatory between the Assessees
irrespective of the amount, the status, and complexity of the cases involved. Income
tax officers should be tax facilitators rather than tax enforcers. Assessee friendly
environment builds confidence among the Assessees over the Department and
officers, in turn builds a cordial relationship between the Authorities and Assessees.
Authorites will be able to understand the Assessees better, and helps the department to
nurture a good Customer Relationship. It improves morale of the Assessees, reduces
mistakes and litigations.
It can be concluded from the analysis that Assessee friendly measures are not
perceived to be satisfactory, and hence, these core areas need to be looked into by the
Income tax department.
239
7.13 PERCEPTION TOWARDS INCOME TAX AUTHORITIES
Income tax policy and administration are indispensable. The effectiveness of

tax administration depends on the efficiency of the tax authorities. It is generally
argued that the authorities are not efficient, corruption exists in the department,
authorities have excessive discretionary powers, tax officials are overburdened,
authorities lack training to handle complicated cases which are in turn determine the
efficacy of the administration. To understand the perception of Assessees towards the
Income tax authorities, these statements were given to rate at five point Likert’s Scale,
from strongly agree to strongly disagree. Table 7.35 shows the frequency distribution
of the responses collected. Respondents strongly agree (46.77%) and agree (31.92%),
to the statement ‘Income tax department needs further improvement’ while 11.9% are
undecided and only 9.41% disagree to the statement. Respondents strongly agree
(42.80%) and agree (22.97%), that the corruption still exists in the income tax
department, while 25.55% are undecided and only 8.67% of the respondents disagree
to the statement. A majority of the respondents agree (52.95%) and strongly agree
(30.26%), that the Authorities have excessive discretionary powers, while 6.69% are
undecided and only 10.76% disagree to the statement. This indicates that excessive
discretionary power leads to corruption in the department. Respondents strongly agree
(45.04%) and agree (34.04%) to the statement ‘Authorities lack training to handle
complicated cases’ while 11.35% are neutral and only 9.59% disagree to the
statement. A majority (41.14%) of the respondents disagree and 15.87% of the
respondents strongly disagree to the statement ‘Authorities are well versed with the
tax laws’, 9.96% strongly Agree and 13.19% Agree to the statement while 19.83% are
seems to be indifferent. A majority (41.79%) of the respondents disagree and 12.82%
of the respondents strongly disagree to the statement ‘Income tax department is
efficient in catching super rich hard to tax people’, 11.44% Strongly Agree and
14.48% Agree to the statement while 19.46% are neutral. A majority (40.68%) of the
respondents disagree and 12.45% of the respondents strongly disagree to the
statement ‘I.T officials are empowered’, 11.53% Strongly Agree and 16.97% Agree to
the statement while 18.36% are neither agree nor disagree. A majority of the
respondents agree (53%) and strongly agree (30.3%), that Income tax authorities are
overburdened, while 6.46% are undecided and only 10.33% disagree to the statement.
240
Table 7.35: Frequency Distribution of perception towards Income Tax
Authorities
Strongly Strongly
Statements Disagree Neutral Agree Total
Disagree Agree
Income tax department 12 90 129 346 507 1084
needs further improvement. (1.11) (8.30) (11.9) (31.92) (46.77) (100)
Corruption still exists in 27 67 277 249 464 1084
Income tax department (2.49) (6.18) (25.55) (22.97) (42.80) (100)
Authorities have Excessive 44 72 66 574 328 1084
discretionary powers (4.06) (6.64) (6.69) (52.95) (30.26) (100)
Authorities lack training to 13 91 123 369 488 1084
handle complicated cases (1.20) (8.39) (11.35) (34.04) (45.04) (100)
Authorities are well versed 172 446 215 143 108 1084
with the tax laws. (15.87) (41.14) (19.83) (13.19) (9.96) (100)
Income tax department is
139 453 211 157 124 1084
efficient in catching super
(12.82) (41.79) (19.46) (14.48) (11.44) (100)
rich hard to tax people.
135 441 199 184 125 1084
I.T officials are empowered.
(12.45) (40.68) (18.36) (16.97) (11.53) (100)
Income tax authorities are 41 71 70 574 328 1084
overburdened. (3.78) (6.6) (6.5) (53) (30.3) (100)
Note: Figures in parenthesis are percentages
The above analysis reveals that authorities are over-burdened due to work-
force shortage; not well versed with tax laws; lack of intensive training and not
empowered to catch hard to tax people. Authorities have excessive discretionary
powers and moreover, the corruption still exists in the income tax department. It can
be concluded that the department needs further improvement in all the core areas to
make the tax administration adorable.
7.14 PERCEPTION TOWARDS SYSTEM OF TAX DEDUCTION AT

SOURCE (TDS)
TDS is a wisely designed mode of collecting the tax revenue. Despite the fact
that the Tax Deducted at Source, the department is not free from criticism, due to the
existence of lacunae. The respondents were asked to express their opinion with five
241
point Likert scale from strongly agree to strongly disagree. The results of analysis of
the responses are presented in the Table 7.36 which shows the mean and standard
deviation. The highest mean value (3.50) with the corresponding standard deviation
(1.198) indicates that the respondents agree that the TDS rules are vigorously applied,
while the lowest mean value (2.34) with the corresponding standard deviation (1.155)
highlights that the respondents disagree that the TDS certificates are issued properly
in time. Delay in TDS certificates creates problems to the assessees in claiming
refunds if any, or it may result into serving of notice which leads to litigations. The
Variable-Tax deducted is remitted to the government account in time- has the mean
value of 2.40 and with more than 1 standard deviation reveals that respondents
disagree to the statement. The mean value above 3 in two Variables shows that the
respondents agree that Tax deducted properly and it is a convenient mode of
compliance for tax payers, as it is hassle free compliance.
Table 7.36: Descriptive Statistics of Perception towards TDS
Std.
Variables N Mean Minimum Maximum
Deviation
TDS rules are vigorously applied 1084 3.50 1.198 1 5
Tax deducted properly. 1084 3.41 1.132 1 5
Tax deducted is remitted to the
1084 2.40 1.155 1 5
government account in time
TDS is a convenient mode of
1084 3.25 1.206 1 5
compliance for tax payers
TDS certificates are issued properly in
1084 2.34 1.155 1 5
time
Hypothesis 10:
H0 : The mean perception towards TDS is the same across the jurisdictions
(µ1= µ2 = µ3= µ4)
Table 7.37 presents the results to test the hypothesis. Kruskal-Wallis test was
applied as the data of the present variable violates the homogeneity and normality
assumptions to apply ANOVA test. The test results indicate that the null hypothesis
(H0) that the mean perception of the respondents across the jurisdiction is retained
242
since the P value of all the variables are more than 0.05, the assumed level of
significance at 3 degree of freedom. Further, the computed Chi-Square values are less
than the tabular value (7.815) at 3 degree of freedom.
Table 7.37: Kruskal Wallis Test of perception towards TDSa,b
Variables Chi-Square df Asymp. Sig.

TDS rules are vigorously applied 6.907 3 .075
Tax deducted properly. 1.268 3 .737
Tax deducted is remitted to the government account
4.506 3 .212
in time
TDS is a convenient mode of compliance for tax
3.936 3 .268
payers
TDS certificates are issued properly in time 1.232 3 .745
b. Grouping Variable: JURISDICTION
The analysis reveals that the respondents perceive the TDS a convenient mode
of tax compliance. It also reveals that Tax deducted properly, but not remitted to the
treasury with in the due date. It is generally perceived that the Deductors lack training.
In some cases, they require to rely on costly professional services for the same. It can
be concluded that steps should be taken to ensure that the deducted taxes are remitted
in time. This requires the Deductors to aware of the TDS compliance rules, and
consequential penalty and prosecution rules.
7.15 PERCEPTION TOWARDS THE RESULTS OF INCOME TAX

REFORMS
Income tax reforms were aimed at making the tax system and administration
competitive, efficient and increasing revenue collection. Increased tax revenue,
reduced cost of collection, improvement in voluntary compliance, reduction in black
money and tax evasion, improved efficiency in tax administration were the key
indicators of a successful tax reforms which should help achieving socio-economic
objectives of the government and bringing in equity. An attempt was made to
understand the perception of respondents towards the results obtained in India through
various reform measures during the study period. Table 7.38 depicts the mean scores
of each variable across the selected four sampling areas. The mean value below 3
represents the respondents’ negative comments, while mean value above 3 represents
243
the positive comments. The table shows that mean scores of two variables – Increased
revenue and reduced cost of collection-are more than 3 which reflect the positive
opinion of the respondents, while all other variables have the mean scores below 3
shows the negative opinion of the respondents. This reveals that the reforms so far
have achieved only increased revenue and cost of collection is reduced on account of
simplified procedure in filing compliance. The achievement of the other objectives by
using income tax as a tool, is not quite satisfactory.
Table 7.38: Distribution of Mean score of perception towards Reform results

across Jurisdiction
Mean
Jurisdiction
Results of the Reforms
Bengaluru Mysuru Hubli Panaji Total
1. Increased tax revenue 4.10 3.92 4.18 4.16 4.09
2. Reduced cost of collection 3.63 3.61 3.76 3.76 3.69
3. Improved tax compliance 2.29 2.27 2.37 2.33 2.32
4. Achieved socio-economic objectives 2.18 2.23 2.28 2.22 2.23
5. Improved tax morale 2.21 2.24 2.35 2.29 2.27
6. Reduced black money 2.96 2.80 2.94 2.80 2.88
7. Improved efficiency in tax administration 2.94 2.83 2.97 2.77 2.88
8. Reduced tax evasion 2.32 2.28 2.38 2.30 2.32
9. Brought about equity 2.93 2.84 2.97 2.86 2.90
Hypothesis 11:
H0 : There is no significant agreement among the assessees towards Reform

results.
H1 : There exists a significant agreement among the assessees towards Reform

results.
To know the agreement or disagreement among the respondents about their

ratings on these variables, Kendall’s Coefficient of Concordance test was conducted.
The test results shown in the table 7.39 direct to reject the null hypothesis (H0) that
there is no agreement in the rating of the respondents towards the reform results, since
P value is less than 0.05 the assumed level of significance at 8 degree of freedom.
Further, the computed Chi-Square value is above the tabular value at 8 degree of
244
freedom (15.507), which shows that there is enough evidence to reject the null
hypothesis and infer that there exists the agreement in the rating of the reform results.
Table 7.39: Kendall’s Coefficient of Concordance of perception towards reform

results
N 1084
Kendall's Wa .402
Chi-Square 3487.551
df 8
Asymp. Sig. .000
The results of analysis explain that the objectives of the results, in the opinion
of the stakeholder, are not satisfactorily achieved. However, this result is only on the
basis of the opinion of the respondents, but the extraction of the true results demands
a multi-dimensional analysis with all possible macro-economic variables which
determine the reform result effectively.
7.16 USAGE OF TRP SERVICES (TRPs)
The Tax Return Preparer Scheme was launched to assist small individual and
HUF taxpayers file their returns of income. The main objective of the scheme was to
make one more channel for filing of return available to small taxpayers, at low cost
and to bring new taxpayers into the tax net. Respondents were asked to express their
opinion about the services of the TRPs. Only 679 respondents agreed that they had
used TRP services. The remaining 405 respondents not at all relied on TRPs. This is
because, Individuals with higher taxable income (Professionals, Firms, Trusts,
Companies, and other persons) relied on Chartered Accountants or tax professionals,
for tax compliance. Those respondents who used the TRP services, were asked to
express their opinion about TRP services. Table 7.40 exhibits the number of times the
Assessees used the TRP services. Of the total number of respondents, 348 have used
only once, 209 respondents have used more than once, 122 respondents have used
every year from the inception, while 405 respondents did not rely on TRPs.
245
Hypothesis 12:
H0 : There is no significant association between Occupation and usage of TRP

services.
H1 : There exists a significant association between Occupation and usage of TRP
services.
Table 7.40: CROSS-TABULATION OF TRP SERVICES AND OCCUPATION
Usage of TRP services

Occupation More
Not Only Every
Than Subtotal
Used Once Year
Once
Government Employee 103 103 60 46 312
Private Employee 74 106 65 34 279
Self-Employed / Business person 186 98 58 31 373
Professional(Audit/Medicine/Legal/Engg...) 42 41 26 11 120
Sub-total 405 348 209 122 1084
Table 7.41: Pearson Chi-Square Tests
Usage of TRP services

Chi-square 45.653
Occupation df 9
Sig. .000*
Results are based on nonempty rows and columns in each innermost sub-table.
*. The Chi-square statistic is significant at the .05 level.
An attempt has been made to understand whether exist any association

between the Assessees occupation and the usage of TRP services. For this purpose,
the hypothesis was tested using Chi-Square test. Table 7.41 shows the computed Chi-
Square value (45.653) which is higher than tabular value (8.433), and P value (0.000)
is less than 0.05, the assumed level of significance at 9 degree of freedom.
So, there is enough evidence to reject the null hypothesis that there is no
association between Occupation and the usage level of TRP, and can be inferred that
usage of TRP is determined by occupation. An attempt has been made to understand
the perception of respondents towards possible service attributes expected from TRPs.
Descriptive statistics (Table 7.42) highlights the number of respondents who used
TRP services, mean and standard deviation for each of the service attributes.
246
Table 7.42: Descriptive Statistics of Perception towards TRP services
Std.
TRP Service Attributes N Mean
Deviation
TRPs are easily accessible. 679 3.28 1.207
TRP services are less costly, than Tax professionals fees. 679 3.24 1.164
TRPs are well trained, well aware of Tax laws to reduce
679 1.49 .640
mistakes in compliance.
TRPs helped availing the exemptions and deduction which
679 1.50 .640
are not known to me.
TRPs provide online tax help to the tax payers. 679 2.44 .564
TRPs are ready for home visit if necessary for the benefit
679 2.74 .804
of the Assessees.
Valid N (list-wise) 679
The mean score of Attributes-Easy accessibility and Less costly- are 3.28 and
3.24 respectively with the standard deviation more than one standard deviation (1.207
and 1.164) indicate that the respondents agree that TRPs are easily accessible, and
less costly than the fees charged by tax professionals. However, the other attributes
which can be labelled as ‘Skillful’, ‘knowledgeable’, ‘Reliable’, and ‘Approachable’,
have the mean values of 1.49, 1.50, 2.44 and 2.74 respectively. This reveals that
respondents strongly disagree that the TRPs are skillful, and Knowledgeable.
Respondents disagree that the TRPs are Reliable and approachable.
It can be concluded from the above analysis that the Assessees expect the
availability of TRP services in all big cities, easily accessible, economical, properly
trained with intensive skills and knowledge to help all the Assessees in tax
compliance. Since, the Assessees are dissatisfied with these qualities, the income tax
department has to enhance the number of TRPs and train them to improve their
service qualities.
7.17 AWARENESS OF AAYKAR SAMPARK KENDRA (ASK)
ASKs are established by the department to answer queries related to the status
of PAN and TAN applications, procedure of filing of income returns, categories of
Assessees mandatorily required to file e-returns or make e-payment, procedure of e-
filing of income tax returns, with or without digital signature. The respondents were
247
asked about the awareness of ASK. Table 7.3.38 shows that 68.3% of the respondents
replied, ‘yes’ while the remaining 31.7% replied, ‘no’.
Table 7.43: Frequency Distribution of Awareness of ASK
Valid Cumulative
Frequency Percent
Percent Percent
YES 740 68.3 68.3 68.3
NO 344 31.7 31.7 100.0
Total 1084 100.0 100.0
The analysis reveals that nearly 1/3rd of the Assessees are not aware of the
ASKs. The department has to further enhance the publicity to create awareness about
ASK so that the tax payers get timely advice and assistance.
7.18 PERCEPTION TOWARDS TAX PAYERS INFORMATION SERVICES
Tax payers’ education and motivation should be one of the important actions
of ITD. This requires the department to provide timely and regular information
through various modes such as Tax payers’ information booklets, Handbooks,
websites and brochures. Respondents were asked to express their perception towards
the information services. Table 7.44 exhibits the mean values of perception across the
four jurisdictions.
It can be identified that the overall mean values are less than three which
shows that the respondents disagree to the positively worded statements. However,
the respondents of Bengaluru and Mysuru Jurisdictions agree to the statement ‘the
web site of the department has been updated regularly’, ‘web site is user-friendly’ and
‘web site has been educative, qualitative, and informative’. The mean values for these
variables are more than three for these two jurisdictions, while for other jurisdiction it
is less than two.
It can be concluded that the tax payers’ information services were not
positively ranked. The quality and the utility of the information services are perceived
to be lower. It can be argued that Income tax department’s efficacy in the publicity
campaign, dissemination of information, and reaching the unreachable among the
public is at the lower level. Result oriented Customer service is one of the pre-
requisites of the competent Income tax administration.
248
Table 7.44: Mean Values of Perception towards Tax payers information services
across Jurisdiction
JURISDICTION
Variables
1. Tax payers information booklets made
2.78 2.91 2.79 2.83 2.83
computation easier
2. I got knowledge through booklets, on
2.44 2.65 2.61 2.66 2.59
filing the returns.
3. Booklets reminds me the important dates 2.26 2.38 2.28 2.35 2.32
4. Handbooks are perfect guides to tax
2.61 2.54 2.56 2.57 2.57
payers
5. Web site of Income tax department
3.41 3.04 2.65 2.72 2.95
updated regularly
6. Web site is user friendly, and hassle free. 3.36 3.13 2.75 2.74 2.99
7. Web site has been educative, qualitative
3.49 3.03 2.61 2.75 2.97
and informative
The department needs to make use of the virtual and social media, and also
develop a strategy to launch programmes of effective tax payers’ education and
motivation. These measures should be drafted in the vision statement and every action
plan. This can be justified on the ground that publicity and right information at the
critical time saves resource, reduces complexity and consequential risk of tax payers.
Further, it can also be argued that tax payers need not be expected to be expertise in
tax laws, but it is the bound responsibility of any taxation system to ensure
convenience (Canon of convenience), certainty (canon of certainty), and consistency,
through updated information, and outreach programmes.
7.19 PERCEPTION TOWARDS SUGGESTIVE MEASURE TO WIDEN THE

TAX-BASE
It is generally argued that the Indian Income tax system should be rationalized
by expanding the tax base and not deepening the base. In order to widen the income
tax base, reforms committees have suggested a wide variety of significant measures.
Despite some honest efforts by the government in implementing effective policy
measures to expand the tax base, and increase the number of assessees, it is
249
experienced in India that only 7 per cent of voters are filing the returns, of these a
major of portion of the Assessees belong to lower range of income.
Table 7.45: Descriptive Statistics of Suggestive measures to widen the tax base
Mini Maxi Std.

N Mean
mum mum Deviation
1) Unorganized business units should be
brought under tax net effectively in a
1084 2 5 4.25 .992
phased manner through compulsory
registration.
2) Mandating all transactions above certain
1084 1 5 4.13 1.131
limit, only through bank.
3) Expand the TDS coverage. 1084 2 5 4.08 .933
4) A minimum tax (Presumptive) should be
1084 1 5 4.08 1.098
imposed on unorganized businesses.
5) All Charitable trusts and NPOs should be
brought into tax net, and the related 1084 1 5 4.05 1.147
provisions should be amended effectively.
6) Bank Account number/s, Aadhar number,
mobile number, PAN, and TAN should be 1084 2 5 4.05 .942
synchronized.
7) The present Slab rates should be continued
1084 1 5 3.99 1.184
for long period of time
8) Exemption limit should be enhanced only
1084 2 5 3.96 .903
after 5 years
9) Valid N (list-wise) 1084
A continued innovation is the need of the hour in this issue. Some of the viable
and pragmatic suggestive measures were recognized. The respondents were asked to
rate these, with five point Likert scale from strongly disagree to strongly agree. The
responses are displayed in table 7.3.40 and identified the highest and the lowest mean
values of 4.25 and 3.96 respectively.
The variable ‘Compulsory registration of unorganized business units’ has

emerged as the most important suggestions. This variable has the highest mean value
(4.25), minimum and maximum scores are 2 and 5 respectively with the
250
corresponding standard deviation close to 1, shows that the income tax department
and the government has to make a bold policy on this. This would strengthen the
vigilance of the department in identifying the large section of the business persons in
India who are still outside the tax net, despite the fact that they are earning huge
income.
The second highest mean value is 4.13 with more than 1 standard deviation,
minimum and maximum scores are 1 and 5 respectively to the variable ‘Making it
mandatory that all transactions above certain limit, only through bank. Again this
measure also strengthens the Annual Information of cash flow of the public. This
helps the department to locate the persons whose monetary transactions exceed the
threshold limit for registration.
The third highest mean (4.08) value is assigned to two variables- ‘expand the
TDS coverage, and ‘Imposing Presumptive taxation to unorganized business units’-
with minimum and maximum score of 2 and 5 respectively and a corresponding 1
standard deviation. It shows that the respondents strongly agreed to this measure.
However, it should be noted that, a policy has already been implemented under the
head ‘profits and gains of business or profession’, but there exists a threshold limit of
annual turnover. This policy has to be rationalized and made it commonly applicable
to all the business person, small or big, including every practicing professional. In this
connection, certain parameters should be designed, rationally, so that every trader and
professional comply with the tax provisions and pay tax for his income without
concealment. All small traders, professionals, academic institutions-including
coaching centers, Agencies of Real Estates, Travelling Agencies, Online service
organizations, Pawn-brokers and unregistered whole-sale dealers, Mechanical
workshops, agri-product merchants, Cyber-cafes, Spa and massage therapy units and
Gyms etc. are outside Income Tax net, and a policy need to be framed to cover all
these persons to compulsorily register, maintain accounts and compulsorily pay a
presumptive amount of taxes.
The variables - ‘compulsory registration of all Charitable Trust and Non-Profit

Organizations (NPO) with necessary amendments’ and ‘Bank Account number/s,
Aadhar number, mobile number, PAN, and TAN should be synchronized’- have equal
mean score of 4.05 each with more than 1 standard deviation and close to 1 standard
deviation respectively. The respondents viewed and strongly agreed these suggestive
251
measures. It seems that the existing provisions of Income Tax are ineffective. The
CAG reports also highlight this issue7. More intensive provisions should be set to
discover and tax the hidden incomes of these organizations. Besides, all relevant
identification numbers should be synchronized in every transaction, and a mechanism
has to be built so that the economic information of all the citizens are clouded into a
centralized system, which in turn highlight (blinking) the numbers wherever the
monetary transactions exceed the specified threshold limit. This information would
help and strengthen the Income tax vigilance for initiating proceedings against tax
evaders. If the current slab rates are slashed to the lower level, a considerable portion
of the potential income earners particularly salaried employees escape from the tax
liability. The same is the case if the exemption limits are increased every financial
year. With this view, the respondents strongly agree to the statement ‘the slab rates
should be continued for long period of time’, say five years and ‘Exemption limit
should be enhanced only after five years’. This ensures the consistency in application
of the provisions legitimately. It also helps the Assessees to make legitimate tax
planning without violating the basic intention behind the statute.
From the above analysis, it can be concluded that all the respondents strongly
agree to all the suggestive measures to widen the tax base. These measures help the
government to bring in to the income tax net, the untaxed potential income earners
and increase the revenue. Further, it also ensures horizontal equity principle.
7
This has been discussed in the previous Chapter - Performance Appraisal of the Income tax
administration.
252
SECTION – III
7.20 ANALYSIS OF PERCEPTION OF INCOME TAX AUTHORITIES
Income tax policies are implemented by the income tax authorities. The
implication of tax policies and the major challenges in implementing these policies
are better known to tax administrators. A separate set of questionnaire was
administered to Income tax authorities. This section explains the analytical results of
the perception of the Respondents.
As per the sampling framework, 170 questionnaires were distributed

personally to the authorities of four jurisdictions. In all, 135 filled-in questionnaires
were received. After removing the incomplete questionnaires, 120 usable
questionnaires were processed for analysis. The demographic profile of the
respondents is exhibited in Part-A and the perception towards various issues - Human
Resource management, Income Tax system, Rationalisation and simplification
measures, Key difficulties in compliance, Tax evasion, Assessee friendly measure,
Recent developments in Income tax administration, Suggestive measures to improve
tax administration and widen the tax base – are presented in Part-A. The Reliability
Statistics table shows the Cronbach’s Alpha 0.856 for 131 items shows the strong
reliability of the data.
Table 7.46: Reliability Statistics
Cronbach's Alpha N of Items

.856 131
253
PART – A
7.21 DEMOGRAPHIC PROFILE OF THE RESPONDENTS
Table 7.47 displays the demographic profile of the respondents. Gender-wise

distribution shows that 39 females (32.5%) and 81 males (67.5%) respondents Age-
wise distribution shows 38 respondents belong to the age group of below 30 years
(31.7%) including both male and female, 19 respondents (15.8%) are classified with
in the age group of 30 -39 years, 47 respondents (39.2%) are classified with in the age
group of 40-49 years, 16 respondents (13.3%) are classified with in the age group of
50 and above years. A majority (39.2%) grouped in 40-49 years of age category.
Classification on the basis of the level of education shows a majority (65%) of the
respondents are in the group of up to graduation, followed by 31 post-graduates
(25.8%), and the remaining 11 respondents (9.2%) have the professional degrees.
Data was collected from authorities with different ranks in each selected range. A
total of 20 respondents (16.7%) each from two categories of authorities-
Commissioner of Income Tax/ Additional Commissioner of Income Tax/ Joint
Commissioner of Income Tax and Deputy Commissioner of Income Tax /Assistant
Commissioner of Income Tax; a total of 40 respondents (43.3%) each from two
categories – Income Tax Officers (ITOs) and Income Tax Inspectors. Another
important criteria of classification of the respondents is the working experience in
years.
254
Table 7.47: Demographic profile of Respondents (Income Tax Authorities)
GENDER
Male Female Subtotal
Count Table Count Table Count Table

N% N% N%
Below 30 21 17.5% 17 14.2% 38 31.7%
30 - 39 17 14.2% 2 1.7% 19 15.8%
AGE (years) 40 -49 35 29.2% 12 10.0% 47 39.2%
50 & Above 8 6.7% 8 6.7% 16 13.3%
Subtotal 81 67.5% 39 32.5% 120 100.0%
Up to Graduation 57 47.5% 21 17.5% 78 65.0%
Level of Up to PG 15 12.5% 16 13.3% 31 25.8%
Education Professional Degree 9 7.5% 2 1.7% 11 9.2%
Subtotal 81 67.5% 39 32.5% 120 100.0%
CIT/ADLCIT/JCIT 16 13.3% 4 3.3% 20 16.7%
DCIT/ACIT 16 13.3% 4 3.3% 20 16.7%
Designation ITO 26 21.7% 14 11.7% 40 33.3%
ITI 23 19.2% 17 14.2% 40 33.3%
Subtotal 81 67.5% 39 32.5% 120 100.0%
Up to 10 Years 33 27.5% 11 9.2% 44 36.7%
10 to 20 Years 24 20.0% 8 6.7% 32 26.7%
Working
20 to 30 Years 24 20.0% 14 11.7% 38 31.7%
Experience
Above 30 Years 0 0.0% 6 5.0% 6 5.0%
Subtotal 81 67.5% 39 32.5% 120 100.0%
Table 7.48: Designation * Jurisdiction Cross-tabulation
Count
JURISDICTION
Total
BENGALURU MYSURU HUBLI PANAJI
CIT/ADL.CIT/JCIT 5 5 5 5 20
DCIT/ACIT 5 5 5 5 20
Designation
ITO 10 10 10 10 40
ITI 10 10 10 10 40
Total 30 30 30 30 120
255
A majority (36.7%) of the respondents are with working experience up to 10
years, 32 respondents (26.7%) are in the group of 10-20 years of experience, 38
respondents (31.7%) are in the group of 20-30 years of experience, and only 6 female
respondents (5%) have more than 30 years of experience. Besides, Table 7.49
displays the jurisdiction-wise classification of Income tax authorities. An equal
number (30) of respondents were selected from each jurisdiction. Figure 7.2 depicts
the distribution of designation-wise respondents.
Figure 7.1: Designation-wise distribution of Respondents

PART-B
7.22 PERCEPTION TOWARDS HUMAN RESOURCE MANAGEMENT

(HRM) OF INCOME TAX DEPARTMENT
Employee friendly Human Resource Management is one of the important

determinants of any successful organization. The CBDT created the HRD directorate
in 2007. The board has cadre management, performance appraisal management and
training and capacity building divisions. Conducive working environment, sufficient
infrastructure, provision for stress management, sufficient supporting staff,
standardized remuneration, effective training and promotion, scientific and unbiased
appraisal system are the important variables of Human Resource Management of
Income tax department. The respondents were asked to express their perception with
five point Likert Scale from Strongly Agree to Strongly Disagree. Table 7.49 presents
the jurisdiction-wise mean scores of these responses.
Table 7.49: Mean Scores of Perception towards Human Resource Management

across Jurisdiction
Jurisdiction
Variable
1. HRD initiatives of the IT department is
3.43 2.93 2.97 3.50 3.21
satisfactory
2. Staff selection procedure is quite
3.50 3.90 3.77 3.50 3.67
satisfactory.
3. Salary & amenities are in accordance with
3.50 3.03 3.23 3.07 3.21
the standard
4. Training has empowered and fully
2.17 2.37 2.20 2.77 2.37
equipped the authorities.
5. Infrastructure and working environment is
3.47 2.63 2.47 2.27 2.71
conducive.
6. Revenue is increasing, but Number of
3.57 3.53 3.67 3.67 3.61
Staff is decreasing
7. Income Tax officials are overburdened 3.97 4.10 4.13 3.93 4.03
8. Motivation and reward policy is
2.50 2.73 2.73 2.70 2.67
attractive.
257
9. IT officials are consulted while framing
3.53 3.00 2.87 2.67 3.02
Income Tax policy.
10. The department of revenue should be
3.37 2.93 3.00 2.93 3.06
given autonomy
11. New appraisal system (qualitative) is
2.33 2.37 2.20 2.77 2.42
unbiased
12. The work force shortage is severe in the
4.07 4.30 4.40 4.40 4.29
department
It can be identified in the table that the variable ‘The work force shortage is
severe in the department’ has the mean score above four in all the jurisdiction, and it
is the highest (4.40) in Hubli and Panaji Jurisdictions. Variable number 6 and 7 in the
table (7.50) also explain the problem of shortage of staff resulted in work overburden
on the Income Tax Authorities. The respondents strongly agreed that there exists a
severe work-force shortage in the Income Tax Department. The total mean score ( >3)
in the first three variable as per the above table shows that the respondents are
satisfied with the HRD initiatives of the CBDT, staff selection procedure, and salary
& amenities. Training, motivation and reward policy, and new appraisal system have
less than 3 mean scores, which reveals the dissatisfaction of the respondents.
Infrastructure and working environment is agreed to be conducive only in the case of
Bengaluru jurisdiction. Respondents in other three jurisdictions express that the
infrastructure and working environment yet to be improved. Respondents from Hubli
and Panaji jurisdictions disagree that Income tax officials are consulted for suggestion
to make policies, while Bengaluru and Mysuru jurisdiction authorities answered
positively. Respondents of Bengaluru jurisdictions favor giving autonomy to Income
tax department, while in case of other jurisdictions, the respondents are seemed to be
indifferent which is evident from the mean score is three.
258
Table 7.50: Descriptive Statistics of H.R.M in Income Tax Department
Std.
Variables N Mean
Deviation
1. HRD initiatives of the IT department is satisfactory 120 3.21 1.208
2. Staff selection procedure is quite satisfactory. 120 3.67 .748
3. Salary and amenities are in accordance with the standard 120 3.21 .952
4. Training facilities empowered and fully equipped the
120 2.38 .831
authorities.
5. Infrastructure and working environment is conducive. 120 2.71 1.032
6. Revenue is increasing whereas Number of Staff is
120 3.61 1.211
decreasing
7. I T officials are overburdened 120 4.03 .888
8. Motivation and reward policy is attractive. 120 2.67 1.056
9. IT officials are consulted while framing Income Tax policy. 120 3.02 1.004
10. The department of revenue should be given autonomy 120 3.06 1.292
11. New appraisal system (qualitative) is scientific and
120 2.42 .866
justifiable
12. The work force shortage is severe in the department 120 4.29 .893
Hypothesis 13:
H0 : Mean perception of Authorities towards H.R.M is the same
H1 : Mean perception of Authorities towards H.R.M is not the same
The above results were further tested through Kruskal-Wallis test, since the
data for these variables violates the homogeneity and normality assumptions,
consequently, ANOVA was not tenable. Table 7.49 brings out the Kruskal-Wallis test
results.
Table 7.51: Kruskal Wallis Test of perception towards H.R.Ma,b
Chi-Square df Asymp. Sig.

PERCEPTION ON H.R.M 3.007 3 .390
b. Grouping Variable: Jurisdiction
259
It can be identified from the table that mean values of the variables- ‘Training
facilities empowered and fully equipped the authorities’ (2.38) ‘Infrastructure and
working environment is conducive’ (2.71) ‘Motivation and reward policy is
attractive’ (2.67), ‘New appraisal system (qualitative) is scientific and
justifiable’(2.42)- are below 3. Table 7.49 exhibits the Kruskal-Wallis test results
which is 3.007 at 3 degree of freedom and the E value is (0.390) greater than 0.05,
therefore, the null hypothesis is not rejected. From this, it can be concluded that the
mean perception of Authorities towards H.R.M is the same.
From the above analysis and hypotheses testing results it is evident that the
authorities are quite satisfied with HRD policies, selection procedure, and salary &
amenities. There exists a severe workforce shortage causing over burden and
unreasonable work pressure in the department. Infrastructure of all the jurisdictions
needs improvement. The efficacy of the staff should be increased with more focused
and intensive training, including soft skills to handle pressure and manage stress.
Reasonable, achievable target should be fixed and Sufficient reward should be granted
for efficient staff. The new appraisal system should be thoroughly evaluated, possibly
a balances score card method should be applied in the Income tax department.
Authorities should be consulted, debates or seminars and conferences should be held
for authorities on various issues of Income Tax administration, where the
deliberations are held, to bring out the hidden ideas of authorities, and the same can
be considered for policy making.
7.23 PERCEPTION TOWARDS INCOME TAX SYSTEM IN INDIA
To study the perception of Authorities towards Income Tax system in India,

respondents were asked to rate the statements with five point Likert Scale from
strongly Agree to Strongly Disagree. The descriptive statistics, Kruskal-Wallis test
results for each of these variables are presented in table 7.52 and 7.53, which shows
the highest mean 3.83 with one standard deviation and the lowest mean 2.22 with 1.3
standard deviation. The respondents disagree to the statements ‘Recent Income Tax
reforms have contributed significantly to socio-economic growth of India’, ‘Income
tax provisions are in favour of rich people only’ and ‘Clubbing of incomes is properly
applied in all clubbing cases’. The mean of these variables are less than three. On the
contrary, respondents agree to the statement ‘Agricultural income is being used for
converting black money into white’ (mean value 3.68 with corresponding 1.265
260
standard deviation); ‘Income tax litigations are due to complexity of tax law’ (mean
value 3.51 with corresponding 1.316 standard deviation); ‘Frequent changes in tax
law is against to the principle of certainty’ (mean value 3.67 with corresponding 1.191
standard deviation); ‘Middle class income earners bear more tax burden than the
higher income group’ (mean value 3.52 with corresponding 1.069 standard deviation);
‘The present Tax rates are high for all Assessees’ (mean value 3.58 with
corresponding 1.281 standard deviation); ‘Income tax law is still complex to
understand even after the reforms’(mean value 3.78 with corresponding 1.07 standard
deviation). It is found that The perception of the authorities is consistent with that of
the Assessees, except few variables- ‘Dividend distribution tax is not justifiable’,
‘Income tax provisions are in favour of rich people only’, ‘Super rich tax payers are
properly identified and assessed’.
Table 7.52: Descriptive statistics of perception towards Income tax system in

India
Variable N Mean S.D.
Income tax compliance procedure has been simplified over the period
120 3.48 1.414
of time
Recent Income Tax reforms have contributed significantly to socio-
120 2.96 1.007
economic growth of India.
Taxation aspects are highly significant in business decision making. 120 3.58 1.135
Income tax is a tool for achieving socio-economic equality 120 3.46 1.114
Progressive system is suitable to India. 120 3.53 1.328
Tax policy is a tool for fostering growth. 120 3.83 1.018
Income tax Reforms so far have been effectively changed the direction
120 3.57 1.301
of the tax system in India.
Agricultural income is being used for converting black money into
120 3.68 1.265
white.
Exemptions to senior citizens is justifiable. 120 3.55 1.249
Dividend distribution tax is not justifiable. 120 3.51 0.907
Income tax litigations are due to complexity of tax law. 120 3.51 1.316
Frequent changes in tax law is against to the principle of certainty 120 3.67 1.191
Income tax provisions are in favour of rich people only. 120 2.96 1.04
Middle class income earners bear more tax burden than the higher
120 3.52 1.069
income group.
The present Tax rates are high for all Assessees. 120 3.58 1.281
Income tax law is still complex to understand even after the reforms. 120 3.78 1.07
Clubbing of incomes is properly applied in all clubbing cases. 120 2.22 1.397
CPC-TDS system made a remarkable growth in tax compliance. 120 3.5 1.372
Super rich tax payers are properly identified and assessed. 120 3.62 1.197
261
Hypothesis 14:
H0 : Mean perception of Authorities towards Income Tax System is the same
H1 : Mean perception of Authorities towards Income Tax System is not the same
Table 7.53: Kruskal Wallis Test of perception towards Income Tax Systema,b

INCOME TAX SYSTEM 2.293 3 .514
The result was tested with Kruskal-Wallis test. Table 7.53 highlights the Chi-
Square value with corresponding P values at 3 degree of freedom. The computed Chi-
Square value (2.293) for the combined values of the variables is greater than the
tabular value at 0.05 level of significance. The null hypothesis is retained since P
value is greater than 0.05. This reveals that the perception of the respondents across
the four sample jurisdiction is the same.
7.24 PERCEPTION TOWARDS RATIONALISATION AND

SIMPLIFICATION MEASURES
Simplicity is one of the important principles of good taxation system. There is

a general belief that the simplified tax system ensures better compliance. Further, tax
policies without a strong rationality may counterproductive to the fiscal system of a
country. The important attributes of rationalization of tax policies and simplification
of tax system are identified, and the respondents were asked to express their
agreement or disagreement to the statement with five point Likert scale while
analyzing the responses of the Assessees under section-II, these variables were
extracted as three major factors. Table 7.54 shows the mean, standard deviation of
these variables. The grouped variables (with their mean score) are presented below,
under different label headings:
A. Rationalization measures
1) Frequent amendments should be avoided (4.07)
2) Surcharge and Education Cess should be discontinued after a short period
(3.57)
3) Irrelevant tax provisions must be changed or wiped off immediately (4.06)
262
4) Amendments should be applicable in the future, but not from the past. (4.14)
5) There should be TDS from Long term capital gain on transfer of agricultural
land (3.88)
6) Tax deductions should be made on every registration of property transfer.
(3.53)
7) Agricultural income in India should be taxed if it exceeds a specified threshold
limit (3.68)
8) Dividend should be taxable in the hands of recipients. (3.67)
9) Further Reduction in tax rates brings better compliance (3.52)
Table 7.54: Descriptive statistics of Rationalization and simplification measure

Std.
Variables N Mean
Deviation
Number of Exemptions and Deductions should be minimized
and simplified for individual Assessees’ and replaced by 120 3.77 1.067
standard deductions.
The age of super senior citizen should be fixed at 70 years. 120 4.18 0.895
All losses carried forwarded should be allowed to be set off
120 3.62 1.055
under any head.
Number of dependents should be considered in case of tax
120 3.83 0.763
liability of individual
Agricultural income in India should be taxed if it exceeds a
120 3.68 1.094
specified threshold limit
Dividend should be taxable in the hands of recipients. 120 3.67 1.04
There should be TDS from Long term capital gain on transfer of
120 3.88 1.039
agricultural land
Tax deductions should be made on every registration of property
120 3.53 1.236
transfer.
Financial disclosure under Income Tax Act and Companies Act
120 3.92 1.017
2013 should be the same
There should be the same provisions under salary head for
120 3.88 0.954
private, public or Government employees.
There should be only two types of residential status 120 3.79 0.934
There should be ceiling on deductions instead of Minimum
120 4.01 0.884
Alternate Tax.
Income Tax rate for domestic companies and foreign companies
120 3.71 1.148
should be the same.
Further Reduction in tax rates brings better compliance 120 3.52 1.167
Amendments should be applicable in the future, but not from the
120 4.14 1.079
past.
Surcharge and Education Cess should be discontinued after a
120 3.57 1.471
short period.
Irrelevant tax provisions must be changed or wiped off
120 4.06 0.955
immediately.
Frequent amendments should be avoided 120 4.07 0.857
263
B. Unambiguous factors/simplification
1) The age of super senior citizen should be fixed at 70 years. (4.18)
2) Number of dependents should be considered in case of tax liability of
individual (3.83)
3) All losses carried forwarded should be allowed to be set off under any head
(3.62)
4) Number of Exemptions and Deductions should be minimized and simplified
for individual Assessees’ and replaced by standard deductions. (3.77)
5) There should be the same provisions under salary head for private, public or
Government employees (3.88)
C. Synergy
1) There should be ceiling on deductions instead of Minimum Alternate Tax
(4.01)
2) There should be only two types of residential status (3.79)
3) Income Tax rate for domestic companies and foreign companies should be the
same (3.71)
4) Financial disclosure under Income Tax Act and Companies Act 2013 should
be the same (3.92)
Mean scores of All the above variables are more than 3, which indicates that
the respondents agreed the statements.
Hypothesis 15:
H0 : Mean perception of Authorities towards rationalization measures is the same
H1 : Mean perception of Authorities towards rationalization measures is not the

same.
It was found that the results of the analysis and test result is consistent with
that of the assessees. It shows that Income Tax Authorities favour simplification and
rationalization measures in the same line of assessees perception. Hypothesis was
tested and the results shown in table 7.55, which indicates (P<0.05) that the P value is
significant. Both Assessees and Authorities favor simplification and synergizing some
of the relevant income tax policies. However, ANOVA results show that the
perception among the authorities in different jurisdictions is not the same. P value is
264
significant since it is less than 0.05, the assumed level of significance and F value is
greater than the tabular value. Hence, the null hypothesis (H0) is rejected.
Table 7.55: ANOVA of Perception Towards Rationalisation Measures

Between Groups 4.411 3 1.470 7.629 .000
Within Groups 22.354 116 .193
Total 26.765 119
Tukey’s HSD test discloses that the perception of Panaji Jurisdiction is

different from that of the other three jurisdictions. This variation might be due to
disagreement of the authorities towards few statements in the component. Authorities
perception is marginally negative to the statements on Dividend distribution tax, age
of super senior citizens, and considering the dependents for tax purposes. Authorities
strongly agree to the remaining statements. However, it is pertinent to rationalize
these provisions in favor of the expectations of salaried assessees who are genuine
taxpayers.
Rationalization and simplification of taxation system is expected to ensure a

better tax administration. Rationalizing and simplifying the tax provision ensures
stability, which is one of the important canons of taxation. Therefore, tax payers and
authorities expect that frequent amendments or changes in tax policies should be
avoided. This helps the tax payers to understand and arrange for tax planning by
familiarizing the running provisions. Therefore, tax policies should be framed for long
period say five years.
Education Cess and surcharge for every Assessment year seems to be

irrational. The Cess has to be imposed to raise further revenue to meet the
extraordinary situation like war, flood, drought etc. Therefore, Cess and surcharges
should be imposed for five years and immediately withdrawn after the completion of
five years of such special occasions. Further, tax laws amendment should be
applicable for future Assessment years. Amendments should not be made
retrospectively applicable. Retrospective amendments cause, increased litigations in
the court due to re-opening the previous assessments. Losses under any head should
be allowed to be set off under any source/ head for indefinite period. In order to
ensure horizontal and vertical equity, agricultural income in India should be taxed if it
265
exceed a threshold limit, and dividend should be included in the taxable income of the
recipient and taxed. Further, the age of the super senior citizen should be reduced to
70 years. This is because, generally the income earning capacity of the citizens after
70 years ceases to exist. Ability of a person, particularly employees, to save and
invest depends on the number of dependents. Therefore, deductions under the savings
category should be proportionately allowed depending upon the number of
dependents (who are not earning). Property transfer is one of the key Black money
creation zone. In order to curtail the tax evasion and concealment of income by
unscrupulous persons, Tax should be deducted (TDS) at source from Long term
Capital gains on transfer of agricultural land and real estate properties. Besides the
above rationalization measures, it can be argued that further reduction in tax rates
brings a better compliance.
Simplification demands changes in various provisions. Rules of residential

status should be changed and there should be only two types of status - resident and
non-resident. Further, the number of days stay to test the residential status should be
changed and simplified in such a way that an ordinary tax payer could understand the
rules. provisions under the head salary should be applicable to Assessees irrespective
of the sector; the existing exemptions and deductions should be removed and a fixed
deduction should be allowed under the head salary, in line with the provisions under
the head income from house property. It is also advisable to fix the limit of deductions
and scrap MAT provisions, to avoid the complications involved for companies to
compute business income. Moreover, this encourages business persons to indulge in
tax evasion practice. Further, income tax rates for domestic companies and foreign
companies should be the same. This restricts the illegitimate transfer of business and
financial arrangement with a view to avoid taxes.
From the above analysis it can be concluded that the authorities favor
simplification and rationalization of income tax provisions that are analyzed in the
present study.
266
7.25 PERCEPTION TOWARDS MAJOR DIFFICULTIES IN COMPLIANCE
Complexity in compliance is one of the important problems that have been

repeatedly represented by the stakeholders to the policy makers. In order to
understand the major problems of compliance faced by the tax payers, the respondents
were asked to express their views in five point Likert scale ranging from strongly
agree to strongly disagree. The results are presented in the Table 7.56 which indicates
the mean and standard deviation. The analysis shows that the mean values of all the
variables, except two variables, are less than three, with corresponding standard
deviation either close to one or more than one. The result shows that the respondents
disagree to the statements Higher TDS rate in absence of PAN; Differential tax
liability due to TDS by lower rate; and tax computed at 30% while filing the returns;
Difficulty in refund transfers; DDT is an additional cost and hence should be
discontinued; Penalty provisions are arbitrary; Requirement of accountant’s certificate
should be discontinued; E-filing of quarterly TDS returns are cumbersome; and
System generated lower withholding tax order is unscientific.
Table 7.56: Descriptive Statistics of Difficulties in Compliance
Std. Mean
Variables N Mean
Deviation Rank
Higher TDS rate in absence of PAN 120 1.93 1.554 3.86
Differential tax liability due to TDS by lower rate and
120 1.92 1.493 3.92
tax computed at 30% while filing the returns.
Difficulty in settling refund cases. 120 2.38 .711 5.55
Tax Credit Mismatch between the online tax statement
120 2.33 1.133 5.40
(Form 26A) and Actual TDS.
E-processing of return is difficult 120 3.18 .961 7.25
DDT is an additional cost and hence should be
120 2.90 1.095 6.55
discontinued
Penalty provisions are arbitrary. 120 3.03 1.270 6.46
Requirement of accountant’s certificate should be
120 2.11 1.075 4.40
discontinued
E-filing of IT return and quarterly TDS returns are
120 2.58 1.034 5.73
cumbersome
System generated lower withholding tax orders is a
120 2.66 1.344 5.87
challenging one.
The mean score of all these variables are less than three. However, the
variables - ‘E-processing of return is difficult’ and ‘Penalty provisions are arbitrary’-
267
have mean score of more than three, but standard deviation is 0.961 and 1.27
respectively. This reveals that the authorities seem to be indifferent about the
difficulties in E-processing of return. This is because, the processing function is
completely outsourced. Moreover, it can be found that the authorities agree that
Penalty provisions are arbitrary.
Hypothesis 16:
H0 : There is no significant agreement among the authorities on major difficulties

in compliance.
H1 : There is a significant agreement among the authorities on major difficulties in

compliance.
Table 7.57 depicts the Kendall’s W value 0.180 which is not greater than Chi-
square value. The test is significant since P value is less than 0.05, the assumed level
of significance. Kendall’s W shows that there is a mild level of agreement among the
authorities towards the difficulties in compliance. Hence, the null hypothesis (H0) is
rejected and can be inferred that there exists a significant agreement among the
authorities on this issue.
Table 7.57: Kendall's Coefficient of Concordance of difficulties in Compliance
N 120
a
Kendall's W .180
Chi-Square 194.047
df 9
Asymp. Sig. .000
It can be concluded from the analysis that the difficulties expressed by the
Assessees are not completely agreed by the authorities. However, there is a mild level
of agreement. This is because, the compliance procedure has been simplified over the
period of time, except the cases applicable to corporate assessees. The difficulties in
compliance has been viewed as such due to complexity in documentation, and
arbitrary provisions in the tax laws such as Higher TDS rate in the absence of PAN,
system generated lower withholding taxes, and arbitrary penalty provisions. However,
these compliance issues are challenges to corporate Assessees. The department has to
simplify the difficult and ambiguous rules of compliance.
268
7.26 PERCEPTION TOWARDS THE REASONS FOR LOW COMPLIANCE
The level of compliance is one of the determinants of effective tax system. It

is generally believed that the tax compliance in India is low. Respondents were asked
to point out the reasons for low tax compliance. The descriptive statistics and
hypothesis testing through Kendall’s Coefficient of Concordance are presented in
Table 7.58 and 7.59.
The analysis identified the Tax Evasion, the most important reason for low tax
compliance. The mean of this factor is 3.77 followed by unsatisfactory tax payer
services, the mean of it is 3.59 with standard deviation of .783, and prevailing
corruption in the tax system, the mean of which is 3.56 and corresponding standard
deviation of 0.977. Complicated documentation has the mean of 2.53 with
corresponding standard deviation of 0.916 which reveals the respondents do not
agree. It can be inferred that the complicated documentation no more a reason for low
tax compliance. This is because, the compliance procedure has been simplified during
the period under study. However, documentation seems to be still complicated in the
case of Corporate Assessees. The mean values of all other reasons are more than 3
which show that the respondents highly ranked as the reasons after the first three
items.
Hypothesis 17:
H0 : There is No significant agreement among the respondents on the reasons for

low tax-compliance
H1 : There exist a significant agreement among the respondents on the reasons for
low tax-compliance.
269
Table 7.58: Descriptive Statistics of reasons for low compliance
Std. Mini Maxi Mean

Reasons for Low Compliance N Mean
1. Tax rates are high 120 3.05 1.052 1 5 4.75
2. Complicated tax law 120 3.38 1.237 1 5 5.72
3. Complicated documentation 120 2.53 .916 1 4 3.55
4. Ineffective penalty provisions 120 3.28 1.236 1 5 5.59
5. Unsatisfactory tax payer services 120 3.59 .783 2 5 6.22
6. Lack of publicity 120 3.47 .798 2 5 6.00
7. Lack of deterrence mechanism 120 3.14 1.197 1 5 5.29
8. Ineffective Tax payer education
120 3.02 1.077 2 5 4.82
and motivation
9. Tax Evasion 120 3.77 .837 2 5 6.82
10. Corruption in Tax system 120 3.56 .977 1 5 6.24
The null hypothesis that there is no agreement among the respondents stands
rejected since the P value is below 0.05, the assumed level of significance. Further,
the calculated Chi-Square value is greater than the tabular value at nine degree of
freedom. The calculated value of Kendall’s W (.134) shown in the Table 7.59
indicates that there is low degree of agreement among the respondents.
Table 7.59: Kendall's Coefficient of Concordance of reasons for low compliance
N 120
Kendall's Wa .134
Chi-Square 144.496
df 9
Asymp. Sig. .000
From the analysis it can be concluded that tax evasion, unsatisfactory tax
payer services and corruption prevailing in the tax system were identified as the most
important reasons for low tax compliance. Besides the main reasons, lack of
taxpayers’ education and motivation, lack of publicity, ineffective penalty provisions,
lack of deterrence mechanism, high tax rates, and complexity of tax laws are also
contributing factors for low compliance.
270
Since low compliance is an important problem in Indian Tax system, there is
an urgent need to improve compliance. Rationalization of tax rates, simplification of
documentation and procedural rules, encouraging voluntary disclosure scheme,
Increasing the publicity, increasing the deterrence measures to recover tax, expanding
the TDS coverage, and enhancing the taxpayers’ motivation and education service are
some of the important suggestive measures to improve compliance. It is also believed
that if the tax rates are slashed down, it is most likely that the compliance would
improve.
7.27 PERCEPTION TOWARDS THE IMPACT OF INCOME TAX REFORMS
The present study attempts to know the extent to which the reforms have been
implemented and the results of it. The main objective of the reforms is to increase the
revenue collection for spending on welfare activities. The other objectives include –
improving tax compliance, improving tax morale, reducing the menace of Black
Money, curbing tax evasion, improving the efficiency of tax administration and
bringing about equity by achieving socio-economic objectives. To know the impact of
Tax Reforms, the respondents were asked to rate the options from 1 to 9. Lowest rank
represents higher value and visa-versa. The results obtained have been presented in
the table 7.60 and Kendall’s Coefficient of Concordance results in table 7.61. Lowest
mean represents highly ranked with first preference. Mean Rank and the mean are the
same since the ranks are coded with the same value. The results ranked include-
Increased Revenue (Mean =1.55) followed by ‘Reduced Cost of Collection’ (Mean =
2.00), both with minimum value 1 and maximum 4. The highest mean is 8.70 for
‘Brought about Equity’ represents last rank. Improved tax compliance and improved
tax morale are ranked as third and fourth items. ‘Reduced Black Money’, ‘Achieved
socio-economic objectives’ (not completely), ‘improved tax administration’, have
been ranked, fifth, sixth and seventh results respectively. Reduced Tax Evasion and
Brought about Equity are least ranked items.
271
Table 7.60: Descriptive Statistics of Results of Tax Reforms
Std. Mini Maxi Mean

Results of Tax Reforms N Mean
1. Increased tax revenue 120 1.55 .743 1 4 1.55
2. Reduced cost of collection 120 2.00 .898 1 4 1.98
3. Improved tax compliance 120 4.45 2.070 1 7 4.53
4. Achieved socio-economic objectives 120 5.15 .967 2 6 5.15
5. Improved tax morale 120 4.50 .502 4 5 4.50
6. Reduced black money 120 5.05 1.810 1 8 5.05
7. Improved efficiency in tax
120 5.40 1.993 3 8 5.40
administration
8. Reduced tax evasion 120 8.15 .359 8 9 8.15
9. Brought about equity 120 8.70 .784 6 9 8.70
Hypothesis 18:
H0 : There is No significant agreement among the respondents on the results of tax

reforms
H1 : There is a significant agreement among the respondents on the results of tax

reforms
Kendall’s W shown in table 7.59, is 0.757, Chi-Square value 726.734 which is

greater than the tabular value. Further, P value at 0.05 level of significance is less than
0.05 at 8 degree of freedom. Therefore, there is sufficient evidence to reject the null
hypothesis (H0) and accept the alternative hypothesis.
Table 7.61: Kendall's Coefficient of Concordance of Results of Tax Reforms
N 120
Kendall's Wa .757
Chi-Square 726.734
df 8
Asymp. Sig. .000
272
From this it can be inferred that there exists a high degree of agreement among
the respondents about the results of tax reforms. Further, it can be argued that the
reforms resulted in increased tax revenue and reduced cost of collection. This has
been evident from the analysis of growth of income tax revenue8. Moreover, there is
no strong evidence to rule out that the tax reforms did not contribute to achieve other
objectives. Despite this argument, it can be strongly assert that the rate of growth, and
the level of achievement made, resulting from the reforms, is not up to the
international standard. However, one of the tangible positive developments in the
Income Tax department is that it is modernized and the speed of adopting the changes
are laudable and commendable.
7.28 PERCEPTION TOWARDS THE ISSUES INVOLVED IN TDS SYSTEM
TDS is one of the great innovations in Income tax system. TDS system
ensures certainty principle of taxation. However, there are typical problems involved
in its operation. Although it is a convenient mode of tax payment for the assessees and
convenient mode of collection by the government, the system has been subjected
certain lacunae. To study the perception towards the problems it TDS, the
respondents were asked to express their opinion with five point Likert Scale ranging
from strongly disagree to strongly agree. The responses obtained were analyzed and
presented in Table 7.62. The table highlights that majority of the respondents have
agreed to the statements ‘TDS rules are vigorously applied’ (70.83%), ‘Tax deducted
properly’ (45.83%), ‘Tax deducted properly but not remitted to the government
account in time’ (52.50%), ‘TDS is a convenient mode of tax payment and
compliance for tax payers’ (47.50%), ‘TDS creates differential Tax liability for
Assessees who are in 30% tax bracket’ (37.50%), ‘Tax Deductors need more training
on TDS rules’(65%), Tax information booklets provide useful guidelines to
Deductors’ (21.67%). However, the majority of the respondents disagree to the
statements ‘TDS certificates are issued properly in time’ (43.33%), ‘Existence of
mismatch between actual TDS and TDS as per 26AS’ (36.67%), ‘Deductors aware of
rules of quarterly filing of TDS returns’ (30.83%).
8
Presented in 5th Chapter of the thesis.
273
Hypothesis 19:
H0 : There is no significant agreement among the respondents towards TDS system
H1 : There is a significant agreement among the respondents towards TDS system.
Table 7.62: Frequency Distribution of Perception Towards TDS System
Strongly Strongly
Variables Disagree Neutral Agree Total
Disagree Agree
TDS rules are vigorously 4 10 18 85 3 120

applied. (3.33) (8.33) (15) (70.83) (2.50) (100)
25 23 14 55 3
Tax deducted properly. 120
(20.83) (19.17) (11.67) (45.83) (2.50)
Tax deducted properly

but not remitted to the 0 0 16 41 63 120
government account in (0) (0) (13.33) (34.17) (52.50) (100)
time.
TDS is a convenient
mode of tax payment and 0 22 20 57 21 120
compliance for tax (0) (18.33) (16.67) (47.50) (17.50) (100)
payers.
TDS certificates are 25 52 30 2 11 120

issued properly in time. (20.83) (43.33) (25.00) (1.67) (8.33) (100)
Existence of mismatch
44 37 27 2 10 120
between actual TDS and
(36.67) (30.83) (22.50) (1.67) (8.33) (100)
TDS as per 26AS.
Deductors aware of rules

33 37 28 11 11 120
of quarterly filing of TDS
(27.50) (30.83) (23.33) (8.33) (8.33) (100)
returns.
TDS creates differential

Tax liability for 24 19 29 45 3 120
Assessees who are in (20) (15.83) (24.17) (37.50) (2.50) (100)
30% tax bracket.
Tax Deductors need more 0 2 28 78 12 120

training on TDS rules. (0) (1.67) (23.33) (65) (10) (100)
Tax information booklets

0 13 17 26 64 120
provide useful guidelines
(0) (10.83) (14.17) (21.67) (21.67) (100)
to Deductors.
274
Table 7.63 depicts the descriptive statistics. The table shows the highest mean
assigned to the statement ‘Tax deducted properly but not remitted to the government
account in time’ (Mean= 4.39, SD=.714), contrarily the lowest mean assigned to the
statement ‘Existence of mismatch between actual TDS and TDS as per 26A’ (Mean
=2.14, SD=1.183).
Table 7.63: Descriptive Statistics of Perception Towards Issues Related to TDS

System
Std. Mini Maxi Mean

N Mean
TDS rules are vigorously applied. 120 3.73 .886 1 5 6.53
Tax deducted properly. 120 2.90 1.260 1 5 4.80
Tax deducted properly but not remitted

120 4.39 .714 3 5 8.01
to the government account in time.
TDS is a convenient mode of tax

payment and compliance for tax 120 3.64 .977 2 5 6.45
payers.
TDS certificates are issued properly in

120 2.35 1.113 1 5 3.41
time.
Existence of mismatch between actual

120 2.14 1.183 1 5 3.23
TDS and TDS as per 26A.
Deductors aware of rules of quarterly

120 2.42 1.241 1 5 3.75
filing of TDS returns.
TDS creates differential Tax liability

for Assessees who are in 30% tax 120 2.87 1.195 1 5 4.39
bracket.
Tax Deductors need more training on

120 3.83 .613 2 5 6.80
TDS rules.
Tax information booklets provide

120 4.18 1.042 2 5 7.63
useful guidelines to deductors
275
Table 7.64 highlights the Kendall’s W (0.410) which is not more than the Chi-
square value, and P value is not greater than 0.05, the computed Chi-Square value is
greater than the tabular value. It can be inferred that there is a moderate level of
agreement in the perception among the authorities towards the TDS system.
Table 7.64: Kendall's Coefficient of Concordance of perception towards TDS

System
N 120
a
Kendall's W .410
Chi-Square 442.588
df 9
Asymp. Sig. .000
This permits to reject the null hypothesis (H0) that there is no agreement
among the authorities on TDS measures, and alternative hypothesis (H1) was
accepted. From this it can be inferred that the respondents are unanimous in their
perception. However, it is identified from the cross examination of jurisdictional
mean value, that the perception is slightly different between Panaji and Bengaluru
region.
From this it can be concluded that TDS certificates are not issued properly in
time, TDS returns are not filed in time, the amount of Tax deducted is not remitted to
the treasury with in the due date. These cause the mismatch between actual TDS and
TDS as per 26AS. It is advisable to remind the deductors, carry out training and
workshops in all the jurisdictions in a convenient time to the deductors to impart
procedural knowledge and also create awareness about the penalty provisions of non-
compliance.
7.29 PERCEPTION TOWARDS TAX-PAYERS’INFORMATION SERVICES

PROVIDED BY THE INCOME TAX ADMINISTRATION
The Income Tax Department tries to provide quality services to tax payers.
The Government embarked on providing word class services to motivate tax payers
for compliance. In order to provide quality services, the quality of tax payers
information services need to be improved. To know the quality of services provided to
tax payers, respondents were asked to express their opinion on a five point Likert
276
scale ranging from strongly agree to strongly disagree. Table 7.65 highlights the
descriptive statistics including different values of mean, standard deviation, minimum
rank, maximum rank, and mean rank, for each statement. The lowest mean rank
assigned to the statement ‘Web site has been updated regularly’ (Mean=2.62,
SD=1.109) whereas the highest mean rank is assigned to the statement ‘Tax payers
information booklets are informative’ (Mean=4.16, SD=0.870). This indicates that
web site has not been updated regularly. However, they strongly agree that the
booklets are informative. The mean of the statement ‘Handbooks are perfect guides to
Authorities’ is 2.83 with standard deviation of 1.241 shows asymmetrical distribution
of the authorities’ opinion.
Table 7.65: Descriptive Statistics of Perception Towards Tax Payer Information

Services
Std. Mini Maxi Mean

Statements N Mean
1. Tax payer information
booklets are highly useful to 120 3.43 1.051 1 5 5.51
taxpayers
2. Tax payers information
120 4.16 .870 3 5 7.39
booklets are informative
3. Booklets provide knowledge
120 3.66 1.119 1 5 6.18
on Compliance rules.
4. Booklets reminds the
120 3.36 1.044 1 5 5.26
important dates
5. Handbooks are perfect guides
120 2.83 1.241 1 5 4.19
to Authorities
6. Web site has been updated
120 2.62 1.109 1 5 3.62
regularly
7. Web site is user friendly 120 4.08 .693 2 5 7.23
8. Web site is educative,
120 3.98 .679 2 5 6.91
qualitative and informative
9. Booklets are easily available
120 3.03 1.033 1 5 4.75
in the department.
10. The utility of websites and
120 2.78 1.170 1 5 3.98
booklets has been enhanced.
Source: Computed from Primary data
277
It reveals that the respondents of Panaji jurisdiction agree to the statement
(Mean=3.17) while the mean of other jurisdictions are less than three which shows the
respondents disagreement. Respondents disagree to the statement ‘The utility of
websites and booklets has been enhanced’ (Mean=2.78, SD=1.170) while the
respondents of Bengaluru jurisdiction are indifferent to the statement. To know the
level of agreement among the respondents towards Tax payer information services,
Kendall’s Coefficient of Concordance was computed and presented in table 7.66.
Hypothesis 20:
H0 : There is no significant agreement among the respondents towards Taxpayers

Information Services.
H1 : There is a significant agreement among the respondents towards Taxpayers

Information Services.
The calculated Kendall’s W (0.250) shows a moderate level of agreement. The

calculated Chi-Square value is greater than the tabular value. Moreover, P value is
(0.00) less than 0.05, the assumed level of significance, therefore the result is
significant at 5 per cent level of significance at 9 degree of freedom. There is enough
evidence to reject the null hypothesis (H0) that there is no significant agreement
among the respondents towards the issues in tax payers’ information services. It can
be inferred that Income tax authorities are having uniform opinion about the tax payer
information services.
Table 7.66: Kendall's Coefficient of Concordance of perception towards tax

payers services
N 120
Kendall's Wa .250
Chi-Square 269.927
df 9
Asymp. Sig. .000
From the above analysis it can be concluded that the Information booklets,
Handbooks, and Web site has been useful to assessees and authorities. To provide
quality information services and to educate and motivate the tax payers in tax
compliance, - Booklets, Handbooks, Publicity Brochures, and website-should be
278
updated regularly. Necessary arrangement shall constantly be made to improve the
quality of information. Further, steps should be taken to intensively circulate, and
made available in all the offices of Income tax department, Banks, Trade association
offices, Treasuries etc.
7.30 PERCEPTION TOWARDS THE ISSUES RELATED TO INCOME TAX

ADMINISTRATION
Various factors determine the administrative efficiency of the department. An

attempt has been made to study some of the important factors of Income Tax
Administration. On the basis of recent development in the Income Tax Department,
17 variables were identified relevant for analysis. Respondents were asked to express
their opinion in five point Likert scale ranging from strongly agree to strongly
disagree. All the statements were positively worded. The responses expressed based
on their agreement or disagreement to the respective statement identifies their
perception. The responses so obtained were analyzed by applying Factor analysis,
with a view to reduce the insignificant variables for the analysis. The table 7.67 shows
the KMO and Bartlett’s sampling adequacy (0.712) which permits to apply Factor
Analysis. Table 7.68 exhibits that four components extracted with Eigen Values 4.430
per cent, 3.095 per cent, 2.610 per cent and 2.435 per cent respectively for each
dominating factor. The rotation with variance of 26.061 per cent, 18.205 per cent,
15.354 per cent and 14.326 per cent respectively. The rotation converged and
extracted four factors with the cumulative Eigen Values which explain 73.946 per
cent, leaving only 26.054 per cent of variables.
Table 7.67: KMO and Bartlett's Test of perception towards Income tax
administration

Sig. .000
Table 7.69 depicts rotated component matrix with principal component

analysis, which brought out four important components. The first component explains
‘serious measures to streamline the enforcement mechanism to tackle Black Money’;
279
‘publication of reward guidelines for informants’; ‘publishing the names of defaulters
and its result’; ‘empowering the tax officials for fair and non-adversarial tax
administration’; ‘updating of induction material’; ‘Coordination between Income Tax
Policy formulation function and enforcement functions’ and ‘adding new posts of
authorities to reduce the work burden’ have been extracted as the fundamental factors.
Among the first major factor variables, ‘serious measures to streamline the
enforcement mechanism to tackle Black Money’ has emerged as a very significant
variable, with the highest (0.854) factor score. Since the component explains about
the functions relating to enforcement functions of the department, this can be labelled
as ‘Enforcement Mechanism’.
The second component with four variables including ‘The alignment of the
process and system for dealing with search and seizure cases’; ‘Demand management
function’; ‘Achievable target for disposal of appeals’; and ‘Establishing a better
understanding between tax payers and tax authorities, through Direct Tax Advisory
Committee’ with the highest (0.946) factor score. Since this component explains the
internal coordinating process for effecting enforcement, it can be appropriately
labelled as ‘Functional Coordination System’.
280

Initial Eigenvalues
Component
Cumulativ
Cumulativ
Cumulativ
Variance
Variance
Variance
Total
Total
Total
% of
% of
% of
e%
e%
e%
1 5.244 30.847 30.847 5.244 30.847 30.847 4.430 26.061 26.061
2 3.195 18.793 49.640 3.195 18.793 49.640 3.095 18.205 44.266
3 2.428 14.285 63.926 2.428 14.285 63.926 2.610 15.354 59.620
4 1.704 10.021 73.946 1.704 10.021 73.946 2.435 14.326 73.946
5 .949 5.584 79.531
6 .753 4.427 83.958
7 .665 3.911 87.868
8 .603 3.545 91.413
9 .490 2.885 94.298
10 .308 1.814 96.112
11 .194 1.141 97.253
12 .151 .886 98.139
13 .114 .673 98.812
14 .074 .437 99.249
15 .063 .370 99.620
16 .038 .224 99.844
17 .027 .156 100.000
The third important component has extracted three variables with the highest
factor score of 0.946, explains basically about the grievance redressing functions. This
component can be labelled as ‘Grievance handling mechanism’.
The fourth component has extracted three variables with highest factor score
of 0.904, explains about the process of simplification of procedures in compliance.
Therefore, this component can rightly be labelled as ‘Process Simplification efforts’.
281
Component
Variables
1 2 3 4
1. The Govt. had taken serious measures to streamline the

enforcement mechanism of the Income Tax Department to .854
tackle the Black money.
2. Reward guidelines for informants are effectively .853

published.
3. Publication of names of tax defaulters has produced .831

positive results.
4. Govt. has empowered the officials for fair and non- .824
adversarial tax administration.
5. Induction material of the department has been updated .757
regularly.
6. I.T policy formulation and enforcement functions are .646

properly coordinated.
7. Recently created additional posts of Authorities have .537

reduced the burden of officials.
8. The process and system for dealing with search and .946
seizure case has been effectively re-aligned.
9. Demand management function is effective. .945
10. Target allocated in respect of disposal of appeals is .869

achievable.
11. Direct Tax Advisory Committee has established a better .663

understanding between taxpayers and tax authorities.
12. Ombudsman institution has been effective in redressing .946

tax payer grievances
13. E-Nivaran addresses tax payers’ grievances effectively. .938
14. The department is prompt in addressing grievances of the .600

tax payers.
15. E-filing of IT returns made the process easy and quick. .904
16. Committee on simplification of I.T laws to phase out .769

exemptions has contributed significantly.
17. E-Sahayog virtually reduced compliance cost. .743
Extraction Method: Principal Component Analysis. Rotation Method: Varimax with

Kaiser Normalization.
282
Hypothesis 21
H0 : Mean perception of Authorities towards issues related to tax administration is

the same
H1 : Mean perception of Authorities towards issues related to tax administration is

not the same
After identifying the grouped variables synchronized in their respective

components, it is necessary to test the variance among the sample population. Hence,
from the four factor scores obtained through rotated component technique,
homogeneity and normality test was conducted and found that ANOVA was not
tenable, since the data of these variables violate the normality and homogeneity
criterion. So, Kruskal-Wallis test was conducted, by choosing the Jurisdiction as the
independent grouping variable. Table 7.70 depicts the calculated Chi-Square values
which are greater than the tabular value, except the fourth factor. Further, P values are
less than 0.05, the assumed level of significance at three degree of freedom. This
shows that the p values are significant and there is enough evidence to reject the null
hypothesis (H0) that the perception towards ‘Enforcement Mechanism’, ‘Functional
Coordination System’ and ‘Grievance Handling Mechanism’ are not the same across
the four jurisdictions, while the perception is the same in the case of the fourth factor
‘Process simplification efforts’. Hence, it is found that there is variation in the
perception among the four jurisdictions.
Table 7.70: Kruskal Wallis Test of perception towards Income Tax

Administration a,b
Enforcement Mechanism 10.182 3 .017
Functional Coordination System 21.743 3 .000
Grievance Handling Mechanism 22.978 3 .000
Process Simplification Efforts 7.257 3 .064

283
To know the groups with in which the differences exist, Tukey’s HSD (Post
Hoc) test was applied and found that there exists no difference between Bengaluru
and Panaji jurisdictions. However, differences exist between Bengaluru and Mysuru,
and Bengaluru and Hubli jurisdictions on first three factors.
It is also found that there exist no differences in the perception between

authorities on the basis of designation. It can be concluded four major factors were
identified. It can be argued that these four factors explain the administration of
Income Tax Department. The opinion of the authorities, towards the factors
determining administrative efficiency, are the same irrespective of their designation.
However, the differences exist between the Jurisdictions. This reveals that there is an
absence of synergy between the different Ranges and Circles and Jurisdictions. This
demands the higher Authorities (Range heads) to establish a strong coordination.
Further, a feedback system has to be established to review and monitor managerial
and functional efficiency.
7.31 SUGGESTIVE MEASURES TO WIDEN THE TAX BASE
Income tax base in India is very narrow. Only seven out of every 100 voters
are tax payers. The number of income tax Assessees are only six per cent of the total
population of the country, even after two major Income tax reforms and globalization
of Indian economy. Since tax base affects the income tax revenue, it is widely
discussed and deliberated issue. Therefore, it is pertinent to widen the tax base. Some
of the important suggestive measures are identified and asked the respondents to
express their opinion on five-point Likert scale ranging from strongly disagree to
strongly agree. The responses were analyzed and descriptive statistics have been
presented in Table 7.71. The table shows the highest mean rank (6.52) assigned to
‘expanding the TDS coverage’ with highest mean (4.61), while the lowest mean rank
(3.65) assigned to ‘Agricultural income should be taxed if the it exceeds the specified
limit’ with the lowest mean (3.63). All the suggestive measures have the mean above
three, with one standard deviation. This reveals that the respondents have strongly
agreed to all the suggestions that help widening the tax base.
284
Hypothesis 22:
H0 : There is no significant agreement among the authorities towards Suggestive

Measures to widen the tax base
H1 : There exist a significant agreement among the authorities towards Suggestive

Measures to widen the tax base
Table 7.71: Descriptive Statistics of Suggestive Measures to Widen the Tax Base
Std. Mini Maxi Mean

Suggestive measures N Mean
All Charitable trusts and NPOs should

be brought under IT net, and the related 120 3.78 .727 2 5 3.95
provisions should be amended
effectively.
Bank Account number/s, Aadhar

number, PAN, and TAN should be 120 3.65 .795 1 5 3.73
synchronized
Presumptive taxations should be 120 3.54 .925 1 5 3.62

effectively implemented.
Expand the TDS coverage 120 4.61 .490 4 5 6.52
Unorganized business units should be

brought under tax net effectively in a 120 4.50 .502 4 5 5.95
phased manner.
Quoting of PAN of both employer and

employee should be made mandatory 120 4.37 .943 1 5 6.03
for the payment of salary of all types of
organization.
Mandating all transactions to be made 120 4.42 .693 3 5 5.82

cashless above certain limit
Agricultural income should be taxed if 120 3.63 .800 1 5 3.65

the it exceed the specified limit.
Exemptions and incentives should be 120 4.43 .498 4 5 5.74

further rationalized.
285
Table 7.72 depicts Kendall’s W calculated to test whether there is any
concurrence among the respondents. The computed Chi-Square value (296.226) is
greater than the tabular value. The P value is less than 0.05, the assumed level of
significance, at 8 degree of freedom. So, there is enough evidence to reject the null
hypothesis (H0). From this, it can be inferred that there exists a significant
concurrence among the respondents towards the suggestive measures.
Table 7.72: Kendall's Coefficient of Concordance of perception towards

measures to widening the tax base
N 120
a
Kendall's W .309
Chi-Square 296.336
df 8
Asymp. Sig. .000
The above analysis reveals that the suggestive measures are worth
implementing. All Non-Profit Organizations such as educational institutions and
hospitals, are considered to be platform for creation of Black Money. Making it
mandatory that all charitable organizations and NPOs brings a potential tax payer into
the tax bracket. However, the related provisions seem to be weak, and thereby most of
the revenue is going out unaccounted as well as untaxed. So, the related income tax
provisions should be rationalized, by making all NPOs registration mandatory.
Compulsory quoting of PAN of both payer and the receiver of the salary will curtail
the deductions of bogus expenses by the business persons. Most of the small factories
and organizations are paying salary without maintaining proper payroll. Further, it is a
practice of some big companies to hire employees from outsources without
maintaining documents, but paying the package amount to the labour contractor. The
payment of salary in this mechanism, either small or big, goes unaccounted.
Therefore, it should be made mandatory that both the payer and the receiver should
quote their PAN. This will ensure the TDS coverage on such remuneration.
Making it mandatory that all transactions about certain limit, say `10000 per
day per transaction cashless ensures genuine record of cash-flow. This record can be
viewed from cloud files and the department can initiate demand notice if the annual
cash-flow exceed certain threshold limit.
286
Rationalizing the exemptions and incentives, wiping off the expired provisions
of incentives, making the income tax slabs and exemptions limit applicable for stable,
without changing it for long period, say five years, brings many more potential
income earners under the tax net.
From the above analysis, it can be concluded that the tax base in India is very
narrow. Reform measures and changing policy in every financial Act are deepening
the tax base. Middle income persons are bearing more burden than the rich. Number
of persons declared income above 500 Crore are less than ten persons. Therefore, the
department should enforce the provisions of prosecution and penalty provisions
effectively, the search and seizure should be aggressive and regular. In addition to the
aggressive and coercive method, the department should educate and motivate the
public to pay tax / comply provisions voluntarily.
REFERENCES
Cox and Cohen, (2000). “An Empirical Approach towards Data Reduction”, American
Journal of Statistics. Vol.2, pp179-192.
KPMG Survey (2011). Tax Trend in Emerging India.
287

Chapter - 7 Perception of Income Tax Assessees and Authorities

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Chapter - 7 Perception of Income Tax Assessees and Authorities

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CHAPTER – 7

PERCEPTION OF INCOME TAX ASSESSEES

PERCEPTION OF INCOME TAX ASSESSEES AND

Perception refers to the respondents’ attitude towards taxation system, various

7.2 DEMOGRAPHIC PROFILE OF RESPONDENTS

Table 7.1: Reliability Statistics

Distribution of respondents on the basis of level of education highlights that

Occupation-wise distribution of respondents (table 7.2) shows that a majority

Essentially, assessees are classified on the basis of the range of declared

50-59 47 4.9% 94 9.8% 141 14.7%

Up to Post-Graduation 41 4.3% 223 23.2% 264 27.5%

Up to Doctoral Degree 52 5.4% 208 21.7% 260 27.1%

Up to 10 Lakh 72 7.5% 250 26.0% 322 33.5%

Above 10 Lakh 92 9.6% 198 20.6% 290 30.2%

Type of Person as per I.T Act

HUBLI 240 6 10 5 5 5 271

PERCEPTION OF INCOME TAX ASSESSEES

7.3 Assessees’ perception on the Income Tax System in India

Application of Factor analysis essentially requires the measure of sampling

Table 7.4: KMO and Bartlett's Test

Kaiser-Meyer-Olkin Measure of Sampling Adequacy. .769

Approx. Chi-Square 30841.125

Bartlett's Test of Sphericity df 91

Table 7.5: Total Variance Explained

Extraction Sums of Rotation Sums of Squared

Table 7.6: Rotated Component Matrixa

Hypothesis was tested to know the difference in the mean perception of

H1 : Mean perception of the respondents regarding Income tax system is different

Table 7.6(a) shows the Analysis of Variance (ANOVA) of the perception of

In case of two factors- ‘Socio-Economic Equity’ and ‘Taxation Policy’- F

Two groups – ‘Self-employed or business persons’ and ‘Professionals’ have

7.4 PERCEPTION TOWARDS RATIONALIZATION AND

Table 7.7: KMO and Bartlett's Test

Kaiser-Meyer-Olkin Measure of Sampling

Table: 7.8: Total Variance Explained

H0 : Mean perception of the respondents regarding the rationalization and

H1 : Mean perception of the respondents regarding the rationalization and

In order to know whether the perception is different among the different

Table 7.10: ANOVA of Perception Towards Rationalisation and Simplification

There exists a difference between Trusts and the remaining respondents as

7.5 PERCEPTION TOWARDS THE MAJOR DIFFICULTIES IN TAX

Table: 7.12: Total Variance Explained

The second factor portrays the discriminating result of the non-compliance. It

H0 : Mean perception of the respondents towards difficulties in compliance is the

H1 : Mean perception of the respondents on the difficulties in compliance is not the

Table 7.14: Test of Homogeneity of Variances

Levene Statistic df1 df2 Sig.

Table 7.15: ANOVA

Sum of Squares df Mean Square F Sig.

The perception of Bengaluru and Mysuru respondents on the ‘difficulty’ is

Table: 7.16: Frequency distribution of Reasons for Professional Advice

Table 7.16 shows the frequency distribution of ranks assigned by the

H0 : The perception of assessees regarding professional advice is the same.

H1 : The perception of assessees regarding professional advice is not the same.

Table: 7.17: Descriptive Statistics of Reasons for Professional Advice

For testing of hypothesis that there is no significant difference in the mean

Sum of Squares df Mean Square F Sig.

Analysis of variance across the different occupation shows that there is no

7.7 TAX MORALE AMONG THE ASSESSEES

Mean score Frequency Cumulative Frequency Percentage

Table7.21: Tax Morale Mean Score

7.8 PERCEPTION REGARDING REFUND MEASURES