Determination of Tax Literacy: A Systematic Review and Conceptual Framework

This paper proposes a conceptual framework of tax literacy (basic, advance and functional) in the Indian economy by a systematic literature review. Basic tax literacy is based upon one’s understanding of general income tax concepts. Advanced tax literacy is associated with one’s ability to apply the tax knowledge for computing tax liabilities. Functional tax literacy is related to the self-filing of Income Tax Returns (ITRs). Thereafter, primary data was collected from taxpayers to test the proposed framework. This study has applied a tax literacy framework and determined the basic, advance and functional tax literacy level of individual tax payers. The proposed framework may assist future research in providing a structured approach for assessing tax literacy as a factor influencing tax compliance. Furthermore, the results of the study are expected to help the government in deciding the future course of action towards effective policy making for taxation.