This is what happens to Income Tax Defaulters


sqrrl- blog- what happens to income tax defaulters

Paying taxes at the right time, and the right amount is not only your responsibility but your duty. Whatever amount you pay as Tax, goes to the welfare of your own country, which is directly related to you.

Still, some people try to escape this basic responsibility, not understanding it’s need. The government too takes this seriously and hence, officials have been directed not to shy away from the rare provisions of arrest, detention and auctioning of attached assets of wilful Income Tax Defaulters. The Central Board of Direct Taxes, in a strategy paper for the current fiscal, has instructed officials in the Department of Tax to make use of the rarely used in this matter. Tax should not just be a medium to Save money, but to Save Invest Prosper.


1. Special Power to the IT department

The TRO, or Tax Recovery Official, has been appointed as an official to use the rare powers, by the IT Department. For wilful evasion of taxes, IT act says rigorous imprisonment from three months to three years which may be accompanied by some fine. In respect of the non-compliant defaulters, the provision of arrest and detention as per rules 73-81 of the IT Act can be invoked by the TRO.

The role of a TRO comes at the fag end in a tax evasion case where the demand raised by the department gets converted into wilful default. He executes his power of arrest and detention when there is a chronic default, means when people try to Save money by wrong methods.

2. Imposition of Penalty

With a sharp rise in the number of non-filers of Income Tax returns, the IT department has instructed its officers to impose the penalty and initiate prosecution in such cases to ensure compliance, for those who bring about their money Saving Ideas by not paying taxes.

If we talk in terms of statistics, the number of non-filers has risen from 22 lacs in 2014 to 59 lacs in 2015, who have potential tax liabilities. The key to widening tax base is to ensure compliance from the non-filers who have potential tax liabilities. For the proper  Save Invest Prosper of the IT department, this is an absolutely necessary step.

3. Formulation of laws

The IT sector has implemented the Non-Filers Monitoring System(NMS) as a pilot project to prioritize actions on wrongdoers.

Under section 271 F, if a person who is required to pay a return of his income, as required under sub section (1) of section 139, fails to furnish such return before the end of the relevant assessment year, he shall be liable to pay, a penalty of Rs 1,000 to 5,000.

Section 276 CC of the Income Tax Act provides for prosecution, punishable with rigorous imprisonment of three months to seven years, with a fine.

This exercise would help in conveying a strong message to the people of India, and assist in the improvement of the overall compliance to direct tax laws.

4. Deprivation of necessities

In order to cripple and check the activities of wilful tax defaulters, the IT department has taken a firm decision to block the Permanent Account Number (PAN) of such entities, get their LPG subsidy canceled, and to take measures to make sure that they are not sanctioned loans. A number of such steps have been taken by the tax department, that would come into force from this financial year, in order to stop the menace of large-scale Tax avoidance and evasion.

5. Making Tax defaulters list public and other insulations

The taxman has proposed that the identities of the blocked PAN should be circulated to the Registrar of Properties with a request for forbidding any registration of immovable properties where such PANs are involved. Such defaulters’ information has also been asked to be circulated across tax offices so that their activities, loans or government subsidies can be plugged out country-wide.

The department has also made the decision to subscribe to the CIBIL data, on a possible monetary basis, to trace financial activities of Defaulters and undertaking the right action against them for recovery and freezing of assets. The department, beginning last year, has also decided to “name and shame” the tax defaulters with over 20 crores default, by publishing their names and other credentials in leading national newspapers and on their official websites.



Obtaining revenue and due taxes from an entity is the ultimate goal of the IT department. By implementing these new strategies, the department also ensures that a strong message goes out to the public that the taxman would not let go of the people who use immoral methods to
Axe Tax and Save money.

Tax default is a big menace that the department is grappling with. These new measures are aimed at curbing these instances and asking people to follow the right path to go ahead with their Tax Saving.

Income Tax Defaulters


 Remember, the best time to plan your taxes is in the month of December. Read more about it here!

Written by

Vedant Kaushik