Beware tax evaders, the taxman is watching! This is the warning Finance Minister P. Chidambaram has sent out as he sought to lead by example and personally filed his income tax returns here Monday.

"Paying tax is a matter of pride. It must become a badge of respect and honour," Chidambaram told reporters as he joined the high-profile campaign of the Income Tax Department warning people of strict action against evasion.

"I have been paying taxes for several decades now," the finance minister said, adding he could have sent his chartered accountant to file his returns, but chose to do so himself to create awareness.

Chidambaram, in fact, had promised to personally file his income tax last week when he also said that the government was exploring the possibility of sparing the salaried class from filing returns.

Yet, chartered accountants say the number of people who have been coming to them with queries on how to file their returns have been steadily increasing over the past few years due mainly to the government's sustained media campaign.

"I am surprised that more and more people - even salaried ones - are now coming to me on tax returns. They, in fact, ask me if they can file the 'saral' form," a chartered accountant said, referring to the form that translates into 'easy.'

Only three percent of India's billion plus population pays income tax and the collection rate has remained stagnant at about 10 percent of the gross domestic product for almost a decade, tax officials maintain. The ratio of direct taxes is even lower at four percent of gross domestic product.

But Chidambaram said the ratio would improve.

It is for this reason he fashioned the media blitz that not only cajoles people to paying taxes but also warns them of the consequences they face in the event of being caught for evasion.

"Bought your wife an expensive Diwali gift? Then make sure that you file your return," says a campaign of the department in a leading daily. "Otherwise be prepared for penalty, interest and finally prosecution."

Tax officials also maintain that the laws enable them to gather information on investments and expenditure, track bank deposits and transactions, scrutinise specific returns and conduct surveys and searches.

Chidambaram, too, cautioned here that there were several cases where some top assessees of the past had stopped filing their returns. "These stop-filers and non-filers are under the scrutiny of the IT Department."