Economic Highlights
New Delhi, 16 January 2017
Wages On Record Are Unreal
Time to ABOLISH INCOME TAX?
By Shivaji Sarkar
The BJP National Executive meet held in the beginning of the 2017 new
year termed note ban a sacred movement and said that it would lead to clean
economy. It is a momentous decision. All future references to Indian economy
would be made in terms of Nov 8, 2016, the day Prime Minister Narendra Modi
announced demonetisation. It would separate the new economy from the
25-year-old liberalisation-globalisation of 1991.
It has its positives as Finance Minister Arun Jaitley says that money
has lost anonymity after demonetisation. He also says the decision carried pain
and short-term drop on economic activity on account of currency squeeze. He
also lamented that the society is “hugely tax non-compliant”.
According to Jaitley, there are only 3.7 crore income-tax assesses in
2015-16 in a population of 125 crore. Of these, 99 lakh had income below Rs 2.5
lakh and paid no taxes, 1.95 crore had income less than Rs 5 lakh, 52 lakh had
income up to Rs 10 lakh and only 24 lakh have above Rs 10 lakh.
This has led to stormy discussions. Does this country have such poor
individual incomes? It looks a bit awkward. Unfortunately, the reality is that.
There are income-tax evaders but even liberally estimated their numbers would
at best be equal to the number of taxpayers, may be far less.
The income-tax at the highest rate of 33 percent is levied over an
income of approximately above Rs 80,000 a month, 20 percent tax on income above
Rs 45,000 a month and 10 percent above Rs 24,000 a month.
The bulk of the I-T payers are salaried people in the organised sector.
The actual salary level in the organised sector is low. In the unorganised
sector it is even lower.
The I-T assessment levies taxes on salaries paid on record. It ignores
that at least half of the organised private sector asks their employees to
return 10 to 30 per cent (in some cases more) of the recorded wages in cash.
These employees are also not paid statutory benefits like DA, medical
reimbursements and provident fund. In many cases, the employees themselves are
forced also to pay the employer’s share of the PF and ESI. It includes almost
the majority of private education institutions from primary to the university
levels, NGOs, industries and other organisations across the country.
Unfortunately, it is happening in even Governments institutions as large
number of the employees are outsourced to contractors. Some cash refunds are also
paid by the contractors to some Government employees too, it is alleged. Shockingly,
it is happening in the national capital, Delhi,
itself.
These exploited employees pay income-tax on the recorded salary – a
double whammy, suffer random salary cuts at the whims of employers. Nobody over
the decades has come to their rescue. The labour courts or any other court can
do little as they function on evidence.
The onerous note-ban is supposed to eliminate black money. But nobody
has thought of the plight of these poor employees – many of them taxpayers as
per their recorded wages. None has devised ways to stop generation of this
exploitative usurious practice.
The Governments are voted by these poor people in expectation that every
new Government would do a little for them. Even demonetisation has not helped
them. Can any demonetisation stop this massive generation of black money by all
kinds of employers across the country?
The country needs to realise that real wages are not that shown on
papers. If that is taken into account, the actual tax-payee (over 90 percent
are employees) would be less than 3 crore. A discreet survey by National Sample
Survey Office (NSSO) may be able to unravel the truth but may be not the whole truth.
The poor employees need immediate Government attention and intervention.
Many of such poorly paid people prefer not to put their savings in banks. So do
many farmers and small businesses. They keep the savings with them. Many of
them had to stand in queues for days to change their tax-paid savings at bank
counters. They lost wages too.
So did many housewives and other women. They also saved out of their
husbands or sons tax-paid earnings. In some cases many women saved over Rs 10
to 40 lakhs over two decades or more in large currency notes. It was not black
money.
The country needs to understand the age-old savings practices. The
heartless income-tax department considers all these savings as black money.
They are touting that they have spotted Rs 4 lakh crore as black income in the
post-demonetised bank deposits. Nothing possibly can be more erroneous than
this.
The businesses and individuals today are murmuring but apprehensive of
raising their voice as tax raids increased. This is not glorifying the nation.
Many of these raids are conducted for purposes other than “unearthing black
income”, the trade organisations discuss in private. The note-ban, they say,
itself had led to kind of a black market. They wonder why some people who
deposited less than Rs 2.5 lakh are receiving notices.
The entire note-ban operation also did not take into account that an
average home normally keeps Rs 5,000 to Rs 1 lakh in cash for sudden
emergencies. Besides, cash remains the fastest and the cheapest way of
transactions.
The banks are still not considered safe. They are expensive. Can the RBI
Governor explain why should a Government cheque bounce cost the account holder
Rs 300 or more in penalties apart from other charges? Would he explain why some
banks are levying charges on cash deposits? Why cannot banks be told to shut shops
if they cannot handle cash?
People want a friendly Government, banking and other institutions.
Stringent rules lead to larger corruption. The Government needs to simplify
rules and taxes.
It calls for a relook at levy of income-tax. The cost of its administration is
more if at least not equal to what is supposedly generated. The Government
would do a great job if the income-tax is gradually abolished and banking rules
and charges are put to a minimum. It would unleash huge money flow and lead to
more productive expenses by people.
It would cause a massive, approximately Rs 2 lakh crore, savings on I-T
collection paraphernalia.
Let the sacred moment that has come leads to purify the system and the Government
acts with larger heart else the muck would continue.----INFA
(Copyright, India News and Feature Alliance)
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