A Reddit post detailing how a small tea stall is evading taxes through multiple QR codes has gone viral, sparking widespread concern over the government’s inability to close a glaring loophole in the tax system. The stall, which earns a whopping Rs 72 lakhs annually, has registered 4-5 QR codes under different family members’ names, strategically splitting its revenue to avoid paying taxes. While the owner’s tactics may seem simple, the financial implications are far from trivial—this kind of evasion is costing the government millions.
The tea stall generates Rs 6,00,000 a month, yet only a fraction of this is subjected to tax. A substantial 40% of customers pay in cash, making it difficult to track the full income. The remaining Rs 43.2 lakhs is divided across five QR codes, averaging Rs 78.6 lakh per code. By distributing income across family members, each receives roughly Rs 14 lakhs annually—well within the lower tax brackets.
Under India’s progressive tax system, income up to Rs 3 lakhs is exempt from tax, and as income rises, the tax rate gradually increases. If the tea seller paid taxes like a salaried employee, their Rs 72 lakh income would result in a tax liability of nearly Rs 20 lakh, even after all possible deductions. However, by splitting the income across five family members, each receiving around Rs 14 lakh annually, the total tax paid drops drastically. After applying deductions, each individual pays just Rs 1.71 lakh, bringing the total tax burden to only Rs 8.55 lakh instead of Rs 20 lakh. This clever evasion tactic results in a direct loss of over Rs 11 lakh in tax revenue—just from a single small business. Multiply this by thousands of similar cases, and the government is losing hundreds of crores due to such loopholes.
The viral Reddit thread on small business tax evasion has ignited a debate, with users frustrated over how tea stalls, jewellery shops, and market vendors evade taxes while salaried individuals face strict scrutiny. Many pointed out that cash-heavy businesses rarely accept UPI, charge extra for card payments, and use CAs to report near-zero profits. Some shared stories like a Bangalore hotel owner fined Rs 25 lakh for using multiple UPI accounts but settling it with a Rs 4 lakh bribe. Others questioned the Rs 20,000 daily tea stall revenue, while some argued that in commercial hubs like Delhi’s Laxmi Nagar, such numbers are realistic. Ultimately, the issue remains—by spreading income across multiple accounts, small businesses are costing the government millions in tax revenue.
This loophole allows the tea stall owner to drastically reduce their tax bill, and the government is losing out on significant revenue. While salaried taxpayers are subjected to rigorous tracking using advanced AI and digital systems, small businesses are exploiting gaps in the system. With the rise of digital payments, it is ironic that these businesses can sidestep scrutiny simply by distributing their earnings across multiple accounts.