The Big Myth On Income Tax Payers In India…..The Honest Tax Payers
In the recent years, the number of Indian tax payers have been rising steadily because of lowered Income Tax Rates and increased digitization. A few decades back,the tax rates were excessive and because of limited computerization, it was difficult to keep a check on unauthorised transactions and nearly impossible to stop tax evasion.
Thereafter with demonetization, linking of Bank Accounts with personal PAN CARDS and ADHAR CARDS, increased digitization etc most of the leakage has been controlled. In conjunction with all these, the successful implementation of GST or Goods and Services Tax has helped control of tax leakage in manufacturing, wholesale distribution and retail sale. All these now leaves very few professionals who still remain out of the tax net.
However since 1950s all Finance Ministers during their budget speech have been stating that India is largely a tax ‘non-compliant’ society. In the last budget presented on 01 Feb 21, the Finance Minister Said that only 3.7 Crores Indians are filing their Income Tax Returns in this poor country of 125 Crore population !! Though none of the Finance Ministers have either dissected the problem and found out the exact reasons neither they have tried to fix the responsibility for this State of affairs.
Well, here are the reasons for all this :
India roughly has 80 crore voters that means 80 crores potential tax payers out of the total population. Now as per Government statistics roughly 25% of the total voters are below poverty line that is 20 crores. So now the number of potential tax payers gets reduced to 60 crores.
Now roughly in every Indian family there is only one working member or earning member out of four. Parents and wife are non earning members.This implies that out of 60 crores potential tax payers only about 15 crores are actually earning and capable of paying tax if any.
Nearly 75% of the households live in the rural areas and are agricultural labourers or farmers. So it again implies that out of 15 crores, roughly 11.25 are exempted from paying any kind of tax being farmers or agriculturists. That leaves us 3.75 crores tax payers …….. they are filing their tax returns !!!!
However look at some of these farmers who have been exempted from paying any income tax on their farm earnings. They live in huge bungalows, have luxury cars and ….can sit on dharnas for months together !!! Many of these farmers also sit in both the houses of Parliament and the State Legislatures.
So now it is very clear that the responsibility for low tax numbers can squarely be placed on the politicians. They have exempted a large number of people to further their own gains. Thus If the Finance Minister wants more people to come into tax net, then, instead of foolishly resorting to rampant raids, surveys, notices, scrutiny, etc., viewed as tax evasion/terrorism, the exemption given to the farmers needs to be reviewed.
Some suggestions are:-
1. In phase 1 just Introduce compulsory filling of Income Tax on all Agricultural Income on large landlords (Say 10 Acres plus) …..The exemption continues
2. In phase 2, they get taxed. This way, you can add 26% of Agriculturists as tax payers (Politicians are also enjoying this exemption).
2. Instead of introducing 5000/10000 penalties on late filers of IT return, come out with positive approach and introduce incentives to IT Return filers ( even in a country like Pakistan, IT Assesse gets discount in purchase of Car).
3. Introduce Privilege Card to those paying taxes above certain limit. Privilege Card to entitle assesse with benefits like Priority quota in railway tickets, use of airport lounges, subsidised medical facilities, etc. and let Tax Payers feel proud.
4. Introduce medical insurance/life insurance on basis of average ITR filled, like coverage up to twice of Gross Income in ITR filed for medical claim and ten times risk cover in case of life insurance.
5. Introduce Pension after 65 Years of age on the basis of tax paid by tax payer during his/her working life.
Let honest taxpayers get certain direct benefits.
As on today, 3.3% of Indian population is filing ITRs as compared to 8% of China. Adding big Agriculturists/Farmers to Income Tax may shoot the figure to more than 10%. This may help to change the tax evasion/terrorism mindset and make India a tax compliant nation.
