Income Tax Reforms

Our citizens are already under enormous stress and tension. Government should try not to add to their woes by expecting them to keep themselves abreast with the complex Tax Rules and Regulation and required to calculate the taxes due, pay them and submit detailed tax returns within the time-limit and even to pay fine in case of delay for many genuine reasons.  IT IS SUBMITTED THAT PLEASE RELIEVE THE INDIVIDUALS AND BUSINESS PEOPLE FROM THE BURDEN OF TAX COMPLIANCE. Below is an attempt to make a suggestion towards this goal.

We render service to the Society and receive INCOME.

We get service from the Society by paying money therefor i.e. it is EXPENDITURE.

It is suggested here that levy tax at the stage of EXPENDITURE that is when one gets tangible PERSONAL BENEFIT from the Society.

We have already GST in place which is applicable on selected items. Expand its scope to cover all the goods and services received by the individual, which is reflected by the EXPENDITURE incurred by the individual/non-individuals (business).

Create an environment wherein most of the transactions (Income and Expenditure) are done through Banks—digital transactions.

The average annual outgo or expenditure through the Banks is reported to be in the region of 190,000,000 million. 

Fix a revenue target—lay down various slabs of TDS against the  aggregate EXPENDITURE to meet the revenue target.

Lay down TDS separately for—

The individuals—prescribe various slabs—the wide gap between the ‘haves’ and ‘have nots’ should be minimised. For Bank withdrawals up to, say, 6,00,000 the TDS can be less than the Bank interest rate. This way even after paying TDS the individuals would be still left with something.  This would encourage people in this bracket to deposit their money into the bank as they would be earning interest but paying lesser rate of tax as TDS.

Business—a uniform flat rate of TDS of 1 or 2% is suggested. This would keep the price-line low.  In any case this levy would be borne by the ultimate consumers. Care should, however, be taken to see that only direct production cost is allowed.  Indirect items like costly Company Guest Houses, liberal use of transport, housing etc. and other facilities which do not have any DIRECT BEARING on the production should not have the benefit of uniform flat rate. They should attract higher TDS.

Charitable Institutions—a flat rate of 1% may be prescribed.  Such Institutions may be allotted a distinct Bank Account.  Both the donors and the Institutions should each pay 1% TDS. It should be made mandatory that such bodies should do all their transaction through non-cash mode—even for petty expenses. This would act as a check on the fraudulent practices obtaining in some of the institutions.

TRANSPARENCY—presently to avoid detection, individuals/parties ask the people to pay illegal gratifications to a third party—which in turn passes/transfers it on to the corrupt individual. It should therefore be incumbent on everyone while making deposit and withdrawing money from the Banks should state the REASON.

Digital transactions—to encourage digital transaction offer some incentive to both the parties making and receiving payments. Also a somewhat lower rate of TDS can be thought of for digital payments.

Similarly a meaningful incentive for Deposit of cash into the bank can be thought of. Also put a ceiling on cash retained in hand for the individuals and non-individuals. Any violation should be visited by summary punishment.  For example, I were to retain in cash more than the ceiling prescribed, I would be given an opportunity to explain within 10 days why I could not deposit the excess amount in my hand into the Bank. Failure to do so would entail confiscation of the entire sum.

The role of revenue authorities—At present the assesses/tax payers are required to submit full details to the revenue authorities full details of their financial transactions.  Instead in the Scheme being suggested here, the Revenue Intelligence would have access to the Bank Accounts and where there are reasons to suspect something amiss probe into them.  The recently introduced “Data Analytical Tool” which came into force from 1^st April 2019, would be a formidable tool in the hands of the Revenue Authorities.

Thus, hereafter the Revenue Authorities instead of directly collecting revenue act as a watch dog and keep a vigil on all the transactions unobtrusively, and where any irregularity/malpractice is suspected probe into that.  That is they would be taking action on selective basis.

If implemented—

Citizens can चैन से सो सकेंगे, and

The State would be able to get maximum revenue for the general welfare on a wider scale.

     (a)    An average middle class family incurs an annual expenditure of around Rs.6 lakhs. In order that such individuals do not feel paying tax unduly burdensome keep the TDS at least one per cent below the prevailing interest paid by the Banks to the account holders.

     (b)   For higher expenditure the TDS can be high which would also bring down the wide gap between the ‘have’ and ‘have nots’.

We get INCOME for giving service to the Society. Hence taxing the INCOME is illogical, not justifiable and irrational.

Not only that-- the individuals are required to familiarise themselves with not so easy provisions of the complex law, but to calculate and pay the taxes dues and submit a detailed accounts of their finances to the Revenue Authorities for them to decide whether the individual has been honest.  The authority has a discretionary power whereby he can decide that the INCOME should have been so much. The tax payers will have to pay taxes as per the arbitrary sum and then go in appeal.  This arbitrary power needs to be withdrawn.

To further compound this injustice those in higher income groups have to unnecessary details like immovable assets, movable assets etc.  He is subjected to indignity only because his income is supposed to be more. This is more so for people whose income is taxed in the form of TDS.

THIS SITUATION IS PATENTLY WRONG AND SHOULD BE DISCONTINUED IMMEDIATELY.