MORE THAN WILLING TO CONTRIBUTE FOR THE WELFARE (कल्याण) OF SOCIETY
BUT THERE IS NO PEOPLE FRIENDLY SYSTEM
A SCHEME WHICH WOULD RELIEVE– BANK STAFF AND COUNTLESS DISBURSING AUTHORITIES FROM THE ONEROUS RESPONSIBILITY OF CALCULATING, EFFECTING ‘TDS’ AND DEPOSITING THEM TO GOVERNMENT; NOT SO LITERATE AND LITERATE BUT WHO HAVE NO TIME OR ARE NOT COMFORTABLE WITH FIGURE WORKS FROM SUBMITTING PERIODICAL RETURNS TO THE AUTHORITIES AND AT THE SAME TIME BRING GREATER REVENUES TO THE GOVERNMENT AT A REASONABLE RATE OF LEVY.
WHETHER THIS CLAIM IS BORNE OUT BY FACT IS FOR THE DISCERNING FELLOW CITIZENS TO JUDGE AND THEN BRING IT TO THE NOTICE OF ALL CONCERNED SO THAT THE SCHEME BECOMES A REALITY.
MAY GOD ALMIGHTY SHOW US THE WAY!!
A people and government friendly revenue collection system which would do without any paper work and garner larger revenue to the exchequer. * In the case of individuals the levy would range from 0 to 25-30%; * In the case of business the levy would be at a uniform rate of 1%. It is so because Business (a) make multiple transactions on a daily or annual basis and (b) simply collects taxes and passes the burden on to the people by way of higher price of the product/goods. The watch word is – PAY no tax as you CONTRIBUTE by way of production of goods/services and saving. PAY tax while you CONSUME goods and services. That is when getting PERSONAL BENEFIT pay a percentage for GENERAL BENEFIT. The Bank Centric System would calculate, recover the tax dues automatically and credit the collection to the exchequer. To sum up Revenue Collection would be in an auto-mode with no human intervention. A win-win situation for both the public and the government.
Dear Fellow Citizens/Prime Minister Narendra Bhai,
I am making this impassioned appeal, after a great deal of thought, to our fellow citizens and the NDA Government. I beseech each one of you to kindly go through the following suggestions.
As a citizen, I seek the freedom to –
* CONTRIBUTE to the Society by way of production of goods/services as per my ability.
* RECEIVE and RETAIN reward for my CONTRIBUTION that is income, without any cut;
* SAVE in the Banks as much as I am able to. The SAVINGS would be available to the Society for nation building efforts, till I actually withdraw it for my personal use.
* PAY tax honestly without any human intervention. That is I should not be required to submit tax returns periodically. It should be determined and cut automatically through an in-built system.
* LEAST INTERFACE WITH OFFICIADOM – I feel that most of the Indians by nature are timid and law-abiding. Even the lowly officials of government (including petty officials in places like even temples and other places where people come in large numbers) treat the general public like dirt. They feel as if they are the owners/law-makers and treat general public with contempt. One must have experienced such behaviors. I would like to avoid coming in contact with any officials. Therefore, I have suggested a revenue collection regime wherein almost there is no inter-face with any of the public authority.
I submit that the above well-meaning suggestions/goal can be achieved if following steps are taken. I believe that this way government would be able to raise greater revenues while the citizens would find the LEVY more reasonable, equitable and not burdensome.
A. INCOME and SAVINGS are in the nature of nation building/wealth producing efforts. Therefore, they should be encouraged by keeping them out of any taxation.
B. We withdraw money from the Banks for obtaining goods/services from the Society. That is we withdraw money for personal use/satisfaction/welfare.
C. Hence when individuals withdraw money for personal benefit/welfare the State/Government would be justified in requiring the individuals to give a share of sum so spent to be contributed for the general welfare (कल्याण) of the Society.
How to administer कल्याण कर
In spite of my best efforts, as an individual I have not been able to get reliable and accurate figures for my proposals. All that I know is that (a) the total gross revenue is around 15 lakh crores per annum and (b) around 800 lakh crores of money is withdrawn by way of bank instruments (Source – Pune based Arthakranti).
In the absence of accurate basic data, I am making just a general observation.
1. I suggest that the point of tax collection may be shifted from Income stage to Payments.
2. How levy at PAYMENT stage is superior to INCOME stage as at present? Firstly, it will encourage people to put in their best to produce goods/services so that national wealth increases optimally. Similarly domestic SAVINGS would grow enormously which is now at a low level.
3. Also, suppose my annual income is Rs.5 lakhs per annum and I raise a housing loan of 50 lakhs, under the present dispensation I am required to pay income tax only on Rs.5 lakhs for which I have worked hard. But I do not have to pay tax on 50 lakhs, which I got based on my credit worthiness and for which I have not toiled, simply because it is called LOAN. I can acquire an immoveable property and enjoy (derive benefit) whose worth is going to increase manifold. If levy is shifted to PAYMENT stage, I will be paying levy on Rs.50 lakhs and amount spent during the relevant period. To me it strikes as more rational—as tax would be based on the real BENEFIT derived by me. It is an important point to be pondered over deeply. I would request the readers to please do so.
4. A levy of just 2% TDS at the stage of withdrawal on 800 lakh crores alone would give a yield of net 16 lakh crores revenues against present gross 15 lakh crores.
This gives us a broad idea of the apparent advantage of shifting from income based levy to payment based levy system.
As a first step government may consider replacing the present Personal Income Tax with a TDS based levy against PAYMENT as suggested at (C) and (4) above.
(a) Ascertain total PAYMENTS being made by individuals – be it cheque, cash, credit/debit card, ECS or transfer of stocks or bonds.
(b) Decide the target amount of revenue to be collected.
(c) Then determine the TDS levy to be made to achieve the target.
Progressive rate of TDS – The disparity of income and therefore payments amongst the populace is quite huge in our country. Therefore, we need to adopt a Progressive rate of TDS to bridge/reduce this gap. For example, payments up to first 2,50,000 can be free of any TDS. Thereafter for each slab an increasing TDS starting from 0.5 to 30% TDS (a low rate of taxation) can be prescribed. In order to discourage cash payments a somewhat higher TDS can be adopted.
In the words of RBI Governor Raghuram Rajan “lower tax rates will help curb generation of illicit funds (black money). We need to focus on how to stop this practice of parking money outside the country.”
Prime Minister had recently observed that “cash transactions are responsible for generation of Black Money”. Also cash transactions give scope for corruption, cross-border terrorism. Therefore a higher rate of TDS for cash transactions would seem to be justified.
Meaningful ceiling on cash withdrawal and retention-of-cash in hand
Fortunately the Government is coming round to the view that there should be a meaningful ceiling on cash withdrawal on a given day. I feel Rs,10000 would be ideal.
Similarly a ceiling may be prescribed for cash-retained-in-hand. May be it could be Rs.25,000. I cannot imagine any situation where any individual would require more than this amount in cash to meet his requirements. One can and should always take recourse to plastic money or bank instruments. Excess money should be promptly deposited into the Bank.
Failure to do so should lead to automatic seizure of the entire cash. It should be subject to confiscation unless the party gives satisfactory evidence to the satisfaction of the authority, within a prescribed time limit.
Consequently incidents like someone carrying few lakhs of rupees in cash and being waylaid and robbed by others can be avoided.
Upgrading of Banking Services –To comply with this requirement, Banking Services need to be upgraded like 7-day working and introduction of two shifts. This would help to make smaller cash withdrawals of cash and also to promptly deposit the excess money in hand.
People that may be rendered surplus in revenue departments can be easily absorbed to meet the demand of extra staff due to introduction of 7-day and two shifts working pattern.
Multiple personal accounts –
For various reasons, individuals have more than one account. Therefore, it would be necessary that the multiple accounts are tagged on/seeded to one common unique number.
Aadhaar card should serve the purpose. If I have five Bank Accounts, all these accounts would be seeded to my Aadhaar Card number.
RBI is also keen to monitor all banking transactions; the idea being introduction of a system which would ensure ‘an automated data from the IT Systems of Banks to RBI and the Governments with no manual intervention which will enhance the quality and timeliness of data for formulation of policy.
Exemption – Exemptions on the one hand gives arbitrary discretionary powers to the Government to decide how much can be exempted. On the other, it offers scope for the unscrupulous persons to evade tax by devious means. Therefore DO AWAY WITH EXEMPTIONS ALTOGETHER. Beyond the basic exemption of Rs.2,50,000 (cumulative for the financial year) suggested above, let citizens pay TDS on every single rupee being spent by them. Rates proposed are so nominal that no one would or should find it burdensome. Recently RBI Governor Raghuram Rajan said that “lower tax rates will help curb generation of illicit funds (black money). We need to focus on how to stop this practice of parking money outside the country.”
Transparency – It is very essential that there is a transparency. We can think of introducing a column wherein the individual(s) would be required to state in the cheque/bank instruments the purpose of issue thereof, for example, ‘household expenses’, ‘rent’, ; ’giving/repaying of loan’ and the like.
This way, we would have achieved the wish of the Union Finance Minister that “We need a Tax System which Generate Revenue on a sustained basis without use of Tax Collection methods at the end of each year to meet the targets.”
Additionally, whenever the Finance Minister requires to raise more revenues for meeting contingencies like famine, drought, natural calamity, war etc. all that he/she will have to do is to tweak the TDS slightly for a given period.
Sharing of revenue amongst Centre, State and Local Governments
The TDS so collected, can be transmitted by ECS simultaneously to the Government Account as revenue. The sums so collected by the Banks can be apportioned between the Central, State and the Local Self Government by an agreed formula to be recommended by the Finance Commission or by NITI. The ratios would be periodically reviewed by the Finance Commission itself. For example, in the case of Mumbai the TDS so collected by the Banks located in Mumbai would be apportioned automatically in the proportion of a:b:c respectively among the Central, Maharashtra and the Brihanmumbai Mahanagar Palika.
Note – As in the case of GST (under active consideration) States may also be empowered to levy additional TDS on the above lines in their respective jurisdictions.
Incentive to the Banks for collection of TDS
As an incentive and reward to the Banks for its vital role of collection of government revenues at source, Banking industry as such can be completely exempted from paying any tax to the government. Banks can also retain the entire profit with themselves. Also the present undue stress and strains on the Bank staff of familiarising themselves with the Income Tax, calculating tax liability of its customers, deducting it and paying it to the government as also preparing TDS statements to clients and government would cease.
As a further incentive Banks can be given a percentage of the TDS so collected by them.
In return, Banks should offer services like signature verification, Bank Drafts, transfer of money etc free of any charge. It would encourage more and more people to open and operate bank accounts with ease.
Vigilance – However simple and reasonable legislation one may bring out, there are bound to be some loopholes in the Statute and human ingenuity and greed being what they are, some unlawful elements are likely to somehow hoodwink the authorities and breech the law
It is sufficient to observe that this possibility can be plugged to a very large extent with the help of NATGRID (with about 11 agencies under it in place). It can keep round-the-clock vigil on the transactions through the tagged/seeded Bank Accounts, in coordination with other agencies– especially an elite team culled out of present revenue departments. Wherever there is ground for suspicion it can come down heavily on the erring parties.
NRI/NRO Account holders – It is strongly felt that the present artificial distinction between resident accounts and NRI/NRO account holders should be done away with. NRIs bring valuable foreign exchange into India. Their money accumulation/deposits are going to remain in India only as Indian Rupees. Therefore, if anything, by being away from the country they are no burden on the country in terms of employment and use of our limited resources. In fact, they should be extended greater benefits. If not, please treat them on par with resident account holders. They continue to be loyal citizen of this country. Treat NRIs on par with other Indian citizens. NRO account holders are debarred from contributing to the Public Provident Fund. Why??? Please bring them on par with other citizens.
FURTHER SUGGESTION – After seeing the experience of change in the matter of Individual Tax, Government can think of extending this to the Corporate Sector. I would like just to say that only people pay taxes ultimately as consumers; business simply collects taxes, serving as a conduit, passing the burden on to people; taxes are passed on as higher prices.
The nature of most business operations demand endless cycles of purchasing and selling. Therefore, it is suggested that TDS on Corporate bodies should be a uniform of around 1%. I do see the prospect of lot of furore by many saying that the government is pro-business without realising that ultimately the burden falls on the general public “aam aadmi”.
Anyhow let us first see how the Government moves in respect of Personal Tax!!!
Advantages: With the abolition of plethora of existing Tax legislation, virtually the entire country would become a Special Economic Zone and prices of goods and services would come down heavily. Our products can become competitive in the international markets. Almost one rate would prevail throughout the country for any given product/service—the dream of any government.
Black money generation would be greatly minimized. Persons having big black money would prefer to deposit the money in the bank and earn interest on and pay the tax at reasonable rate as and when they opt to withdraw the money for any payment.
Similarly scope for corruption would be minimised with a ceiling on cash transaction. The life line of corruption – cash – would have been choked.
In short, it would be a win-win situation.
Lastly, I would like to end this submission with my dream. Replacement of all taxation legislations with one simple all-inclusive Taxation Regime on the above lines can ensure a regular revenue yield of even as much as 40-50 lakh crores. Hope and pray the Almighty bestows the necessary wisdom on the legislature. Shubham!!!
Dear fellow citizens – Kindly gave a thought to the above proposal and act in the best interest of the country.
By: S. Vishwanathan