Is tax evasion a crime in India?

Yes, tax evasion is a crime in India. It involves deliberately misrepresenting or concealing income to reduce tax liability and is punishable by fines, penalties, and imprisonment under Indian law.

Is tax evasion illegal or legal?

Tax evasion is illegal. It refers to the unlawful act of not paying taxes owed by underreporting income, inflating deductions, or hiding money and is considered a serious offense subject to legal penalties.

What is the meaning of tax evasion?

Tax evasion refers to the illegal act of deliberately avoiding tax payments by concealing income, inflating expenses, or underreporting financial details. It is a criminal offense under Indian law and can lead to penalties, prosecution, and imprisonment.

Is tax evasion a predicate offence?

Yes, tax evasion can be treated as a predicate offence under Indian law. In certain cases, such as money laundering investigations, enforcement agencies like the ED (Enforcement Directorate) are empowered to investigate assets linked to tax evasion and take legal action.

What are the most common forms of tax evasion?

Common methods of tax evasion include hiding or not declaring income, underreporting earnings or wealth, overstating deductible expenses, smuggling, and conducting unreported cash transactions. These practices are illegal and punishable under the Income Tax Act.

What is the fine for tax evasion in India?

Penalties for tax evasion in India vary. Fines can range from ₹10,000 to ₹1,00,000. In cases involving willful tax evasion exceeding ₹25 lakh, Section 276C of the Income Tax Act provides for imprisonment ranging from six months to seven years, along with a monetary fine.

What is tax evasion in taxation?

Tax evasion is the illegal practice of reducing tax liability through deceitful means such as hiding income, falsifying expenses, or manipulating accounts. It is a punishable offense intended to show lower profits and escape legitimate tax obligations.

What is the best example of tax avoidance?

Tax avoidance involves legally reducing tax liability by using permissible exemptions, deductions, and investment options. For example, claiming deductions under Section 80C, investing in tax-free bonds, or using available credits are legitimate ways of avoiding excessive tax burden.

Why choose an FD over risky investments?

Unlike volatile options like stocks or crypto, FDs offer fixed, guaranteed returns. It’s ideal for investors looking for stability and predictability. Check out latest rates offered by Bajaj Finance of FDs and start investing now.

What is Tax Evasion - Meaning, Methods, Penalties

3 min

17-June-2025

Taxes play a critical role in national development, from healthcare to highways. But when individuals or businesses try to skip paying their fair share—through tax evasion—the damage runs deep. It not only affects the country’s progress but also punishes honest taxpayers.

What many don’t realise is that the consequences of tax evasion—ranging from hefty fines to imprisonment—are avoidable. With smarter money choices, such as investing in Fixed Deposits (FDs), you can grow your wealth legally while staying financially secure.

What is tax evasion?

Tax evasion is when a person or business deliberately hides income, underreports earnings, or fails to comply with tax laws to reduce or avoid paying taxes. Unlike tax planning (which is legal and encouraged), tax evasion is a criminal offence under Chapter XXII of the Income Tax Act, 1961.

Instead of evading taxes, redirect your efforts into earning safe, guaranteed returns through investments like FDs. It’s a win-win for your finances and your peace of mind.

Let your money grow while you stay compliant. Bajaj Finance Fixed Deposits offer up to 7.30% p.a. returns with flexible tenures and 100% safety. Open FD.

Also Read: What is Tax Planning?

Common tax evasion practices (and why you should avoid them)

1. Filing ITR late

If you miss the due date for filing your Income Tax Return (ITR):

You may have to pay a late fee of Rs. 1,000 if your income is under Rs. 5 lakh.
If your income exceeds Rs. 5 lakh, the penalty rises to Rs. 5,000.

And if you fail to file at all, the Assessing Officer can impose further penalties up to Rs. 5,000.

2. Hiding income

If you deliberately hide income, the penalty under Section 271(C) can be 100% to 300% of the tax evaded. That’s triple the amount you tried to save.

3. Skipping audit requirements

Failing to audit your accounts as required under Section 44AB can attract a penalty of:

0.5% of your total sales/turnover/gross receipts
Or up to Rs. 1,50,000

Why risk penalties when you can start building wealth legally? Open a Fixed Deposit online in minutes and enjoy predictable returns. Check latest rates offered by Bajaj Finance on FDs (up 7.30% p.a.).

4. TDS/TCS non-compliance

Some common violations:

Not obtaining TAN: Rs. 10,000 penalty
Late TDS/TCS returns: Rs. 200 per day, up to the total TDS amount
Wrong or missing TDS info: Rs. 10,000 to Rs. 1,00,000

5. Deliberate tax evasion

If you underreport income of Rs. 25 lakh or more with malicious intent (Section 276C), the punishment could be 6 months to 7 years in jail, plus a fine.

6. Incorrect PAN details

Wrong PAN while filing taxes or for TDS can result in:

Rs. 10,000 fine for incorrect PAN
20% TDS deduction (instead of 10%) if PAN is missing

Aspect	Tax Evasion	Tax Avoidance	Tax Planning
Definition	Illegal means to skip tax	Use of legal loopholes to reduce tax	Legitimate tax-saving investments
Legality	Criminal offence	Legal but ethically grey	Fully legal
Ethical?	No	Questionable	Yes
Examples	Hiding income, fake invoices	Routing money via tax havens	Investing in ELSS, PPF, FDs
Penalties	Imprisonment, fines, prosecution	Scrutiny, legal rework	None

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Avoid Penalties, Build Wealth: Why It Pays to Stay Honest with Taxes

What is tax evasion?