The Tax to GDP ratio in India is close to 17% of GDP where the tax leveraging is as low as 1.9.

Factors contributing to low Tax compliance in India: 1) Large - scale exemptions eg: 2 out of 6 or MSMEs are below 40 lakh exemption under GST 2) Decline in savings rate as well as investments eg: Household savings reached 8 yrs low of 18% 3) Prevalence of Base Shifting and Profit evasion eg: Mauritius shift by companies 4) Low income and exemption from income tax eg: Recent budget exemption increased to 5) Online compliance mechanism for better Transparency 6) Following the Laffer curve Tax collection Tax Rate

There is a need to simplify and rationalize the direct tax regime with initiative like Direct Tax Assessment to leverage the system for financing the fiscal deficit. Ways to Improve Direct Tax Collection: 1) Presumptive taxation (Economic Survey) → French and British model eg: Startups used TIN ID for digital payment also 2) Usage of common financial ID for all transactions eg: Dravid used TIN ID for digital payment also 3) Rationalization of multiple direct taxes → into single tax 4) Increase in wealth tax for high net worth individuals of India eg: UK taxes 25% while India 35% 5) Online compliance mechanism for better Transparency 6) Following the Laffer curve There is a need to simplify and rationalize the direct tax regime with initiative like Direct Tax Assessment to leverage the system for financing the fiscal deficit.

— ADITYA TALWAR · AIR 270