India’s Income Tax Department is stepping up its crackdown on tax evasion among high-net-worth individuals (HNIs), using a more tech-driven and data-backed approach. Authorities have identified a wide gap between declared incomes and real financial behavior—prompting closer scrutiny.
Government data suggests that while 7–8 lakh individuals may be earning over ₹1 crore annually, only around 3.5 lakh have declared such income in their income tax returns (ITRs).
This large mismatch has put several HNIs on the radar of tax authorities, who believe that many are underreporting their actual earnings. In Assessment Year 2023–24 (for FY23), out of nearly 8 crore total ITR filings, only 3.5 lakh returns disclosed incomes above ₹1 crore.
A senior income tax official, speaking to Moneycontrol, highlighted that many individuals are spending in ways that do not match their reported income, prompting the department to dig deeper. The concern is that a large number of HNIs are still flying under the tax radar despite their high lifestyles and expenditures.
New Tools and Methods in Play
To tackle this, the tax department is now deploying advanced technology to perform a ‘360-degree profiling’ of such individuals. This method aims to capture the real income and financial footprint of HNIs beyond just ITRs.
Authorities are monitoring high-value transactions through TCS (Tax Collected at Source), TDS (Tax Deducted at Source), foreign remittances, and even GST data to gauge spending patterns.
The idea is to cross-reference various data sources to assess whether a person’s expenses are aligned with their declared income. If there’s a significant gap, they could be flagged for deeper audits or tax notices.
This data-driven approach is also seen as part of a broader attempt to ensure transparency and fairness in India’s tax ecosystem, especially at a time when public infrastructure and welfare programs rely heavily on tax compliance.
Focus on HNIs as Tax Base Expands
The department’s focus on HNIs comes as India continues to expand its taxpayer base, with greater digital integration and stricter compliance measures. Officials believe this targeted effort will not only increase revenue but also improve trust in the tax system.
“We are not targeting income earners—we are focusing on non-compliance,” an official emphasized.
With spending behaviors and luxury lifestyles being easily traceable today—thanks to digital trails—underreported income is becoming harder to hide. The government hopes this move will discourage tax evasion among the country’s wealthiest citizens, and further strengthen India’s formal economy.
