This is a subjective topic but I would love to answer. There are several means by which government knows about your earning. How do they know how much you earn? They know by how much you spend and invest.
This means by which government tracks your income and expenses.
- By TDS as deducted by your company or bank or any other person who pays you for your services.
- By the amount of cash deposits, you do in your bank account.
- By the amount of investments, you make be it immovable and movable.
- Local officers conduct surveys and seek answers and look out for possible tax evaders.
- Based on your credit card spending beyond a limit
- Based on your purchase of immovable property beyond a certain level.
They collect data from every place where you have your pan or aadhar linked. Previously the infrastructure was not very developed but it is highly successful in recent times. Several committees and departments have been set up to detect possible tax evasions.
Also, if you filed returns before then they would ask why are you not filing it now. Moreover, various amendments have been made in the income tax act which restricts transactions to be done in cash. So all those will be done by banking mode and shall be reported to the department automatically.
Thus, They track all your actions
It is advised to comply with law strictly as any form of evasion attracts heavy penalties and even jail terms.
Visit Business Helpers | Business Advisors and Tax Consultants for business advisory and tax consultancy.
Tax planning should be promoted and Tax evasion should be avoided. Planning is legal evasion is illegal.
Hope this helps.
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