Tax Evasion in India

Individuals have the freedom to self assess income and pay taxes. That doesn't mean if you do not declare a particular stream of income to evade taxes, you will go scot free. Tax evasion is an illegal activity which entails not filing income tax returns altogether or misrepresenting the tax payable amount. It is different from tax avoidance, which is a legal activity because tax laws are used to reduce the tax amount payable. Tax returns are scrutinized only if income tax authorities feel that there is tax evasion. If they conclude that you have deliberately concealed income to reduce tax liability, you will be penalized. Tax evasion is the general term for efforts by individuals, corporations, trusts and other entities to evade taxes by illegal means. Tax evasion usually entails taxpayers deliberately misrepresenting or concealing the true state of their affairs to the tax authorities to reduce their tax liability, and includes, in particular, dishonest tax reporting (such as declaring less income, profits or gains than actually earned; or overstating deductions).