Dated : 01-Dec-2018 Saturday New Delhi India.
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In India the whole concept of black money generated by people evading personal income taxes is highly flawed.
There are two thinking process to this problem one spiritual, philosophical, ethical, devotional, scriptural belief in next life reincarnation, doctrine of Karma and the other, pure materialistic charwaka school of thought. In short Karmis!
The 1st School of thought (SoT) comprises of those solely in the teaching, academic, advisory, priestly professions where both job opportunities & in job money making cannot be done by dubious way.
They have accepted the fact very early in life that nothing is permanent all is temporary & one's own money is really not one’s own but Lord Krishna's consort Smt Lakshmi Devi's & in the end, one can take nothing, with them, when they leave this planet ! Death + Income Tax only truth in life rest all is flux.
So such people, have respect/obedience for the law, know the Income Tax Act backwards, with clear, clean, understanding and have no problems in declaring there true Incomes 100% & paying their Taxes! They have toiled and come up in life the straight forward way & know the value of each Rs. My parents, my eldest aunt ambhujham & myself are such examples.
I accepted the fact very early in life at 18 yrs, that if I earn & pay my income taxes honestly, then I can't afford marriage & stayed single as a monk! I adviced my halwa poori, tabla, bansoori (Flute) nandi, Cousin Sri Krishna Chandra Pantha of 28 years who started his career in DMRC 2 years ago also in the same way.
Such persons feel that better not to increase income,pay tax rather than increase income & pay tax ! Earn that much which can be kept below the tax savable limit.
A roof over the head, power, water, sanitation, fixed basic wireline phone with internet ! In short less money + more time & Vice Versa.
There are people like me who don't want more work, or more money & pay more tax, especially in India, where wastage of tax money is rampant, due to scams,corruption,undeserving subsidies. They feel that the very existence of personal income tax, acts as a Airbus A330 speed brake on a person's productivity.
Such people after paying/saving income taxes honestly will never be seen in high end malls, movie theatres,buying designer clothes, clutches, branded sunglasses, swiss watches, apple i phones, luxury cars, foreign travel, credit card holding usage etc.
They will be more of safe savers than conspicuous consumers. They can never understand the terms “disposable income” or taking a “Loan” or a thing on "emi" & would be living within their means! A zero debt life !
At present I'm wearing an adidas full sweater donated to me by my neighbour as it was out of fashion for him.
Till date I don't have a bike/car. I’m using a 1985 Rs 550/- AVON 20″ bicycle for my commute, purchased second hand, from my neighbour, in 1998 for Rs 150/- + a Hero Street Racer MTB cycle gifted by my uncle in April 2016 whose purchase price would be Rs 5,000/-.
My mother used public transport bus for 40+ years, now uses CNG Auto & we paid Rs 4.53 Lakhs in income tax for FY 2018–2019 as all our income was via bank accounts only. We live in our own,a modest 113 sq metre DDA MIG Flat of 1978 construction in Central Delhi.
I remember in FY 2005-2006, when I'd gone to submit my Mother's I.Tax return in paper to our local office the receiving clerk created objection that the Salary Form 16 didn't 've the rubber stamp seal of the employer. I asked him to put the case in scrutiny if he wanted to do so and he was shell shocked & accepted the return.
But the case was picked up for scrutiny for some other lame reason like return papers lost in department fire etc.
It continued for 10 months and in the end return filed was accepted as truth as nothing was detected with closure assessment order issued. But meeting the JCIT was really an experience & he was stunned when I could explain each & every thing with documentary proof to him added with philosophy. After 2 hearings by just looking at my face, he mellowed down, his post ego crashed, conclusion, that we were genuine people & himself asked my mother not to come personally as there 'd be no further summons.
He didn't understand one simple thing ? That a person in such a long, high, university academic profession, filing returns for the last 40+ years, how she could be a tax dodger ? His vedanta on us was that we were escapists but it was a virtue also.
The second SoT belongs to Karmis i.e lawyers, CA, businessmen, politicians, actors, auditors, bureaucracy! They have never & can never be honest straight forward in anything as money + matter is the only goal of their life, having attained everything via crooked, twisted means, circumventing the system 'll do so till eternity. Our 21st century modern university education produces such kind of people only.
So such people can never become honest Income tax paying people ! Why?
They have zero spiritual knowledge, values, have only one life & have to make the most out of it + leave their wealth to the next generation.
Their professions on a daily basis, require them, to make, so much expenditures of their incomes, where they end up, paying a lot in indirect taxes to the govt as GST, are always in Debt, to maintain their high end life style unable to save anything. A latest example, former German Tennis superstar Boris Becker.
So the trade off is between Direct personal Income tax (DPIT) Vs Goods & Services Tax (GST)
If someone earned Rs 5,00,000/- as commission in cash in a real estate deal & evaded it in their income tax return but used the same to construct two rooms in their office,house, bought petrol for their vehicle, or a apple i phone, the Govt got GST on everything that they purchased.
In some cases more than DPIT Rate ! The Govt doesn't loose any revenue anywhere as it claims by personal income tax evasion by people !
What it wants now is to milk people both ways in Taxes DPIT + GST.
It wants the salaried class to pay 31.20, 34.32, 35.88 % income tax, 28% GST on new vehicle purchase, 4-10% state tax, as parking, road, registration Fees, 18% GST on insurance premium, vehicle service, components, parts plus Rs 36 as Tax on each litre of petrol. From 2014-2019 when global oil prices crashed to $ 30, excise duty on petrol was increased drastically to mopp up more & more revenue for the state, from honest salaried tax payers.
India has the highest tax on aviation fuel & airports.
In India the maximum revenue for Central & State Govt's is through liquor alcohol,tobbaco & other life negative sin goods sales which are taxed between 100% to 900% depending upon type. All income tax evaded money of the illiterate or aristocratic business class goes only towards these stuff's without which central & state governments in India would go bankrupt.
So nearly 50% of income of the salaried class is going in taxes with nothing commensurate received in return from the Government in terms of medicare, Old age home benefit which has again to be footed by oneself from post tax income. The Govt has failed miserably to check private health care retail Inflation.
Another hue & cry about people evading personal income taxes is a charade.
When the I.T department doesn't 've the resources or man power to scrutinize each & every return filed even for Rs 1,000/- tax evaded per return (x) no of returns filed then why so much effort in improving compliance & creating fear in people ?
It is just like 100 people applying for a I.Tax Commissioner's Job & all 100 getting selected W/o their Exam papers being evaluated.
Most of the DPIT evasion is happening through legitimate banking transaction channels & not via petty income earned via cash transactions in the unorganised sector.
Demonetisation was done only for untaxed cash hidden for years for the rainy day by the semi literate or illiterate who 'd no knowledge of Income Tax Act. Even after issuing notices to people, who deposited cash, in their bank accounts during Demonetisation, to file Income Tax returns, the average income declared by each depositor was just Rs 2,50,000-3,00,000/- for which Nil Tax was payable.
The govt just got electronic returns/paper records of people on it's servers/filing cabinets, with no tax collected from them. After 2 years in FY 2018-2019, even this has stopped, as people lost jobs, due to slowdown, in economic growth, retrenchments, due to demonetization & a flawed GST.
For any form of loan receipt, property sale advance, loan repayment, the maximum cash transaction limit is Rs 20,000/- For Business expenses Rs 10,000/- For cash deposit in bank account without PAN # it is Rs 49,999/- but for other cash transactions like buying Gold without PAN # name it is Rs 2 Lakhs per day.
By having varying figures for cash transactions, Does this portray a Govt seriously interested in curbing tax evasion & promoting Digital currency ?
The Govt uses compulsory TDS @ 10% (Even for those in 5% I.Tax Slab) as a tool, by presuming, that all income earners, are potential tax evaders,making Form 15-G/H (For those having only interest incomes) conditions contrary to Section 80/87A of Income Tax Act, ineligible even for those who can legally save tax upto an income of Rs 10 Lakhs (Check YouTube Video's on this) when in the end it has to refund the entire TDS with Interest as Tax Due is nil.
Only in 2019, the Govt has awoken to this, after section 87A rebate, was increased to Rs 12,500/- in Finance Act-2019 & modified Form 15-H but not 15-G. Senior citizens are honest tax payers and Non SRCTZN's are tax evaders. Refer this
For somebody earning Rs 10 lakhs annually via term deposit interest, Rs 1,00,000/- 'll be compulsory TDS but if earned via salary & tax savings proofs submitted to employer then nil tax payable & nil tds.
If somebody kept Rs 3 crores in a savings bank account & got Rs 10,50,000/- as annual interest, there is no TDS, but the assessee has to pay the required tax himself on self assessment.
Such contrary rules exist together & India has the best of IAS IRS UPSC Civil services exams to attract the cream of talent.
By using compulsory TDS the Govt is in one way encouraging tax evasion. Even if an individual assessee is honest & willing to pay the tax due, by way of Advance or Self Assessment Tax, before due date,but the person deducting TDS is not, and doesn't deposit the TDS, in Govt account/PAN # of the assessee then the assessee has no other way but to evade the income earned (if all rectification efforts fail with the deductor till due date of filing of return) as it is not reflected in their form 26AS.
The weakness of all Governments are that they are vast bureaucracies, they work on the priniciple, that what is not on the file doesn't exist.
In Kali-Yuga the rulers 'd be just tax plunderers. This present govt headed by "Asabhya Neecha Kisma Ka Aadmi" (ANKKA) is proving it in toto with the above form,TDS rules & following the philosophy of Tax plunder public money & spend on one's own(ANKKA's) luxurious life style.
So those who understood the govt’s charade, tricks, plan their way of life, income, expenses, savings accordingly! Those who read the Bhagavad Gita "As It Is",Srimad Bhagavatam of Srila A C Bhaktivedanta Swami Prabhupada very early in life know this.
For example to avoid GST, I use doordarshan free DTH service,travel by sleeper class in trains ! I've never had food once in my life in a McDonald's domino's pizza hut where I've to pay GST & instead relied on my neighborhood kulchcha cholley, tandoor roti sabji wallah [Street Burritto Vendors]
I.M.H.O even if all declared their true incomes & paid their taxes honestly in India DPIT cannot be abolished for the next 50 years as no Govt wants to reduce it's own wasteful expenses & continues with it's loss making Co's like Air India, BSNL, MTNL, ITI plus crores wasted in Lok Sabha Rajya Sabha disruptions.
At the most it can be simplified by increasing basic DPIT exemption limit to Rs 10 Lakhs p.a [US $ 14,286 p.a] reducing compliance burden, for low income earners, making a clear definition as to “What constitutes income”/taxing all forms of incomes like gifts, inheritance,dividends,ppf interest etc.
No income should be tax exempt other than agriculture.
Any sum recorded in the books of accounts of the assessee is his/her income. Why have two words or varying definitions for the same thing ? I never understood the logic in DPIT of having different heads of incomes, additions, subtractions, deductions, reliefs, rebates,C.I.I,surcharge,cess ? Is this a snake & ladder game ?
Reducing the DPIT Act to 10 A4 size pages & having one single rate of tax @ 18% which is the revenue neutral/average rate of GST.
Domestic savings, necessary expenses both will increase, leading to higher indirect taxes, life will become much easier with compliance burden reduced & more free time for “Other worldly spiritual pursuits”.
Just have one basic exemption limit for all ! Beyond that everyone pay's tax @ 18% and relaxes. As tax rate is low,all incomes are taxed there is no scope for litigations due to varying interpretations. At present one has to keep the I.T Act in mind before doing any transactions even with close family members.
A peak DPIT Rate of 35.88% [30+15+4%] above 1 Crore income, now, 'll always lead to income concealments & tax evasions.
An Example:- Mr X Earns 5 crores p.a pays 35.88% DPIT i.e Rs 1.794 crores to the Govt. He gifts Rs 2 crores to Mr Y his major son, who is a sanyasi, doesn't earn anything, but whole life practices Krishna consciousness, chants Hare Krishna mahamantra to attain Lord Shri Krishna's Lotus feet, Goloka Vrindavan, for himself & Mr X.
This 2 crores is Tax Free in the hands of Mr Y, as their is no inheritance or gift tax, and invests it in a bank deposit, to get interest income. The interest RCVD is also not clubbed with the income of Mr X.
Now if such transactions happen annually, during the life time, of both Mr X & Y the Tax Department can question it,seek demand, as a case of aggressive tax planning or tax avoidance. I.Tax department is not concerned with who attains Shri Krishna, Goloka Vrindavan or Vaikuntha.
But if DPIT is 18% then both pay tax at their ends & relax with no hassles of litigation & Government gets the same revenue. If they spend after paying I.Tax again Govt gets GST. If they save that is again good for the country.
Another thing I felt was, the Income tax act is encouraging lethargy and creating work shirks in India. Only Salary income, should be taxed, at much lower rate, in single digits and interest income, house property,capital gains, dividends, should be taxed at higher rate as these are earned without any toil. Similarly business income should be taxed higher. This para is applicable if the Govt can't bring one rate of IT @ 18% in future.
Another thing I felt was, the Income tax act is encouraging lethargy and creating work shirks in India. Only Salary income, should be taxed, at much lower rate, in single digits and interest income, house property,capital gains, dividends, should be taxed at higher rate as these are earned without any toil. Similarly business income should be taxed higher. This para is applicable if the Govt can't bring one rate of IT @ 18% in future.
The entire GST failed because of multiple rates & multiple HSN Codes ! It was only the old excise duty with input tax credit termed as GST. A stone age view, was that food biscuits, should attract 18% GST, for people to buy/consume from tax paid income but gold biscuits, gems, jewellery, diamonds @ 3% for those buying in cash upto Rs 2 lakhs !
Income tax evaders 'd park their evaded wealth/tax in britannia bourbon, parle hide n seek, unibic ginger biscuit tins for future generations beating inflation or in gems gold diamonds, jewellery ?
GST @ 12% on roadster bicycles, bicycle parts, used by the poorest, tells us, how serious the Govt is, in cleaning up the environment, reducing its dependence, on imported crude oil, helping save, precious foreign exchange for India ? At the same time Govt is asking auto makers to go full Electric by 2025.
Another factor, against abolishing personal income tax, is a huge Job market, thriving behind it, of CA's, TDS return filers, PAN card NSDL,Tax return preparers who would be rendered without work & income.
No economist wants to admit the truth on TV that if India has to solve it's problems either it should cap it's human population growth by giving tax incentives [The one rebate in DPIT which no Finance Minister in India ever thought about was to give 100% Tax exemption for monks or society people who chose not to marry & have children voluntarily] or increase its GDP to grow @ 10% p.a for next 20 years to satisfy it's young population's aspirations.
Now GDP growth of 10% p.a can't be achieved by honest income tax paying populations unless all become "Krishna Conscious" ! It can be achieved only by tax evaded incomes splurged on consumption lead growth.
If consumption of goods & services increases our factories will run @ 100% capacity creating direct indirect employment.
But such out of the box ideas cannot be implemented by this Govt even till 2024 when this useless, self pity, megalomaniac, chaiwaala, bakolia, shameless, remorseless, ANKKA,who, inflicted utmost misery on the poor, downtrodden, helpless, working class farmers, by his pigeon brain, idea of demonetisation, with no commensurate benefits in tax collected but his own party men GJR in Karnataka state,were spending 500 crores, on their daughter weddings, during Demonetization-2016, who attends celebrity actress weddings, whose knowledge of economy, finance, taxation, is just of the size of a postal stamp,who has to wear Rs 1 crore suits + undertake everyday foreign travels. His close industrialist friend spent 700 crores on his daughter's marriage in 2018.
It would take too much courage & gamble on the revenue fiscal deficit fronts like another demonetisation! But if taken, it would bear fruits, over time, better than demonetisation by earning the goodwill of people.
Swami Aniruddha.
Updated:-15-Jun-2019 19:42 hrs IST.
After Shri Arvind Subramanian former Chief Economic Advisor to Government of India calculated that Indian GDP Figures are to be reduced by 2.5% from official figures for 2011-2016, even in future, whatever I wrote has been vindicated.
Honest personal income tax payers can't be conspicuous consumers/vice versa, can't contribute to 7% annual gdp growth.
Once the ANKKA Govt removed the muzzle on it's CBDT ED and they went after direct tax evaders, in the past 5 years, gdp growth has crashed from 7% to actual 2% with all around gloom in auto sales, Apple i phones, FMCG, bank nbfc credit, corporate profits, home loans, Job losses in textiles,gems & jewellery, the worst being the real estate sector. NPA's of banks are increasing daily with PNB, IL & FS, DHFL type fraud hitting all other genuine NBFC's.
So, all consumption, splurge in the past, was being financed, through Personal Income Tax evaded,bribe,scam,laundered money,in the Congress Era, which led to artificially high GDP growth, high assett prices, created jobs, gave the Govt Excise/VAT revenue & all sections of society [other than honest dpit payers] were happy.
People have finally awoken and realised the Govt's tricks of milking them in taxes both ways [DPIT+GST] and after honestly paying direct taxes, have drastically cut back, on wasteful consumption, compulsive shopping, eating out in costly hotels, discarded the idea of buy, use for 10 days, throw, buy again cycle. Even essentials like hair oils,tooth pastes,soaps are witnessing slow off take due to which GST collection is down.
GDP 'll continue to shrink further & the days of 7% real gdp growth is a long distance dream & so is employment for the youth. Hope people become sensible, learn from these events and take this further by not reproducing in future. India has enough population & problems for at least 25 years.
Updated:-06-Sep-2019
GDP growth has crashed to 5%[Actual 2.5% only] in Apr-Jun 2019 Quarter and my above blog post has proved 100% correct.
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