In India, Tax Evasion Is a National Sport

As Rama Murthy completes the sale of his apartment in the Indian city of Hyderabad, he accepts from the buyer a bag full of rupees—part of the purchase price the tax man will never see. “Almost 40 percent of the sale price I got in hard cash,” says Murthy, 39, who works at a software company. “It’s illegal, but it’s rampant in India to avoid paying tax.”

India loses 14 trillion rupees ($314 billion) from tax evasion annually, depriving it of funds for investment in roads, ports, and power, says Arun Kumar, author of . General government tax revenue is an estimated 18 percent of India’s $1.5 trillion in gross domestic product, the lowest among the four BRIC nations, International Monetary Fund data show. With so little revenue coming in, Prime Minister Manmohan Singh is now attempting India’s biggest overhaul of the tax code in half a century.