Taxpayers’ Perceptions Towards Income Tax Administration: A Study from Indian Perspectives

Abstract

Tax procedures more particularly income tax laws are considered to be more complex and cumbersome by the individual taxpayers. Direct tax constitutes 46.84% of total tax revenue and personal income tax contributes 51.48% of total direct tax in India. Similarly individual taxpayers constitute around 95% of the total taxpayers in India. But individual assesses faces most about compliance challenges and administrative burdens. Governments often introduce new amendments to address these issues and promote economic efficiency. This paper primarily investigates factors influencing tax administration and taxpayer perceptions, particularly in the context of Indian income tax. This analytical study utilizes primary data and focuses exclusively on income taxpayers in Odisha, an Indian state. Despite uniform national tax laws, the study assumes consistency in typical taxpayer behavior across states. To address data collection limitations, nine districts in Odisha with a 2011 census literacy rate above 80% were selected. A structured questionnaire with five-point Likert scale were used to collect responses through random sampling techniques. From the total sample of 1300 respondents, only 1068 provided complete answers. The study’s findings are based on this sample. The research employs Exploratory Factor Analysis (EFA) and Structural Equation Modeling (SEM) to identify significant aspects of tax administration. Three factors emerge: tax procedure, tax services, and tax penalty from factor analysis. Notably, all observed variables have positive impacts on these factors, corroborating the hypotheses, except for one. Tax procedure negatively correlates with tax penalty and services, while services positively correlate with the penalty, resulting in a hypothesis rejection. This study confirms that more the simplification of tax procedures, lesser will be the chance of problems in tax services and chances of imposing penalty.