Information Madness

@Arvind,
thank you for your valuable comments here. Would you be interested in writing on finance column for informationmadness.com?

Dear Sir(s)/Admn
Many thanks for yur message.I was intrigued - about writing for your page.
Is this a paid assignment - based on what I am expectd to write about. If so, could you please let me know what sort of compensation I can expect.There is more along these lines.

Yours sincerely

Arvind Swaminathan

Dear Sir(s)
Many thanks for your acknowledgement. I would love to be of any assisstance. However, I am a layman, and, as such, how can I be of much help?
Te comments on the new direct taxes code are based on common sense, and discussions with friends, along with some of my own thoughts on human nature/behaviour. How that might allow me to dowhat you ask is something I cannot, as yet, grasp.
Any ideas?

Kind regards
Arvind Swaminathan

Before I get into this mesage, let me state that - in my humble opinion - there should be no income tax for any income (total) up to Rs 3.0 lalhs. This way, people should be able to plan their own pensions/retirement income.

PPF and PF have been in operation probably since even before I was born. People have been suing ths for compulsory savings for rainy days, such as marriages/education of children, housebuilding loans, medical emergencies. etc.People are comfortable with it, and so on.

However, this is a doouble edged sword - in that it is a very big source of deposits for the governent, but at relatively high cost. this is because not only is the governent paying 8 % pa interest, but also interest on interest from previous years.The argument is that this amount keeps accumulating, and so more interest becomes part and parcelof the scheme.

On the flip side, the RBI (tax free) relief bonds, the amount is deposited only for 5 or 6 years, like a fixed deposit, and even 8 % pa interest is ample - the same rate as with PF or PPF. However, this could work out to e les of an interest burdem, because only interest on each years fixed amount is paid - not on any accumulation, unles the interest is added to the principle, as in the case of PF and PPF.
Usually, the interest was paid each year, either 6 monthly or 12 monthly.
This was a godsend for most investors, as the money was safe - with the Reserve Bank of India(RBI), and, as there was no tax payable, there was no question of tax being deducted at source(TDS),therefore, no refunds at all. This freed investors from the clutches of the income tax staff, who used to extort their own form of tax from people who were to receive tax refunds as a result of TDS, etc.

That is one of the big reasons for most investors being totally against making PF and PPF no longer EEE - and turning it into an EET instrumet makes most people rather fed up -at the thought of TDS - as with fixed deposits, etc - and many - or large numbers wil opt out of these (PF and PPF). From the point of view of ivestors/tax payers, RBI (tax free) relief bonds would be a much better proposition

Yours sincerely

Arvind Swaminathan

This is again more common sense - and what I forgot to mention yesterday.

When one buys anything in bulk, one does expect a discount. In the same way, the highest level of tax payers should also be encouraged - and the highest level, say above Rs 30 lakhs income, should be given a 'discounted rate of tax - so, if all others pay @ 10 %, these should pay say, 9 % - and above Rs 1.00 crore, they should pay only 8 % for all income above Rs 30 lakhs.

Let us remember, the more tax, the higher the rate of taxation, the more a person saves by using odd means to evade. If he can spend Rs 50 crores and save Rs 500 crores, why wont he?
If he feels that 10 % is too much, that is why above a certain limit, a lower tax rate is better, for then he either pays the tax, and he has an real incentive to increase turnover with higher utput, as he knows that he too benefits to the tune of 90 % or more. If he still feels he must avoid/evade, then there really n excuse for it - and the government can 'throw the book at him'.

Kindly don't treat this as being flippant - for the time for the governent to EARN its money from the public/tax payers has indeed come.The tax payer will not throw his money into the bottomless pit/well anymore.

THE CHOICE IS YOURS. You have the two choices in front of you - much depends on which path you choose.Do you want the path of incentives and common sense, or do you wish to stay with squeezing and stifling the tax payer and putting it into your own pockets - somethig which the average tax payer just wont do anymore. the huge black economy is testimony to THAT.

Yours sincwewly

Arvind Swaminathan

This is common sense, and all these ideas are designed to make it uneconomical to evade tax, and thus cut out the generation of black money - with all the evils they bring.
Only then, (when all his holdings are in the bank, and accounted for, )can each person go to the police without any fear, should anyone try and extract/extort money from him.

Unfortunately, everything has been designed to make everyone evade/avoid tax which has brought to life a parallel economy, and a parallel government - all illegal, and threaten our very existence as a nation.

The principle should be - the more a person earns, the more he should be able to keep for his own purposes. If he finds that he has to pay too much, he will put his mind to avoiding/evading. Just try snd imagine how mch effort and intelligence is channelled into such nefarious activities - which could be utilised for positive purposes - such as develoment, and how much past policies have dragged and held us back from our basic intent/aim - that of development, and a better life for all of us.

I would hate to see this country being ruled by unscrupulous and antisocial elements. I would be grateful if government policies are guided by a little more common sense, as well as a sense of giving people much more in terms of incentives to stay honest - and incentives to help develop/create a better life for all of us.
The past has been one of disincentives and stifling of the economy. Try givng incentives a chance - otherwise, before much longer, this is also going to be rules from across the border, such as Pakistan - which is where most of the anti-social elements appear to be based - Dawood Ibrahim, for one.

I have had a chance to think things over and the following is what I believe as regards the new direct taxes code which was unveiled on August 12, 2009.
On the surface, it appears to be very friendly, but, a little scratching under the surface does bring certain points to the fore, which I believe, should be looked at and examined, thoroughly.

On the surface, the new slabs do appear to be public 'friendly', but are they ?

Upto Rs 3.00 lakhs - no tax
Rs 3.00 to 10.00 lakhs - tax at 10 %
Rs 10.00 to 25.00 lakhs - tax at 20 %
Above Rs 25 .00 lakhs - tax at 30 %
The tax at each slab is over and above that payable at the previous lower tax slab.
Why are the higher money earners being penalised ? Why are they being penalised for being more intelligent/hard working/enterprising ?
When a person does something to earn much more than the lazy, n'er do good person, why should the better person be penalised by being made to pay tax at a much higher rate?

My view is that ALL tax payers above the income of Rs 3.00 lakhs pa, should be taxed at the 10 % rate. This does give every person the incentive, to make as much money /earn as much as he/she can, knowing that the more they earn, the more they can keep for whatever they wish to do with it - whether to spend on children's education,luxuries, invest, create more industry, expand businesses, or whatever they wish.
Is it to too difficult to understand that the more they have they more taxes they will generate - by simply buying more for consumption, they would increase the sales of whatever they buy - more sales, more employment, more business, with more indirect taxes at every stage. Why must the government squeeze the high earner, and stop him from doing even more, by taking away the very incentive for making more money in his own way - and if he has the incentve the major chunk of what he earns will be 'white' money - cheque payments - in bank accounts - legal bank accounts - and which wil be trackable.
The government itself is incapable of creating any real PRODUCTIVE/GAINFUL employment - why is it stopping capable people from doing what it cannot do on it's own?

As regards PF and PPF - these are savings schemes which most people have grown up with - and feel comfortable with. To mess about and make them EET from the EEE which have always been is stupid. Worse, the government itself gives a return of only 8 % while the amount is accumulating. Now, it is proposed to tax it at a minimum of 10 % on withdrawal, at its lowest rate/slab? If total income is higher, then jt could be under the 20 or even 30 % rate/slab. How can this ever be justified ?
If this is to be made law, then it would be better to abolish it altogether. It would be better to advise everyone to go in for pension schemes which give a monthly income, rather than PF and PPF as an EET system of saving - for that would not be a saving at all.In fact, to me, this is an outrage.

The whole principle of taxing higher slab groups at higher rates is wrong - it penalises the very people who should be given incentives, and, in fact, it perpetuates the British Raj, and makes more and more people convert to the black money economy. When are people going to understand that the general public needs to have the incentive to work harder - and you will not do that by taking more and more of his earnings and putting it into someone else's pockets - be it the politician or the beaurocrat.

In my younger days, I was told this 'parable' often - about the man and his very lazy son. The man get so angry,that one day, he told his son that from that day on, he would have to go out to work, and come back with at least one rupee - if not, he would not get any meals at home.
The boy went out, and borrowed a rupee from his friend, and showed it to his father. The father then told him to throw it into the well at the bottom of the garden, which the boy did.
This went on for a while, until the day came when he had exhausted all such sources of borrowing, as he had never paid back. That day he realised he would actually have to WORK AND EARN the rupee. However, being known as the laziest person in town, no one would hire him -until finally, the local blacksmith took him on. That day, the boy really worked - his face was covered in sweat, grime, coal dust, - the works - and had blisters on his hands. At the end of the mornings work the blacksmith tossed him a four anna (1/4 rupee) coin, and said that was all his work was worth. The boy took this four anna coin home, and showed it to his father.
Seeing his codition, his father told him to throw the coin into the well, and clean up to eat. For the first time, the boy refused to do so - saying 'This I have EARNED. I will not throw it away'.
The government had better learn theDOUBLE LESSON from this. First, the public are sick, tired, and fed up with throwing their hard earned money into the bottomless pit/well, which is what the government and administration has become. Also, the government had better learn that when the public does pay taxes, it expects to see tangible results, such as better facilities, such as water, electricity, better treatment at the hands of the administration, public transport, at reasonable rates. What we see today is that government officials who live in NDMC areas pay HALF of what the general public ays for electricity, and whereas the NDMC provides water at proper pressure so that overhead tanks are filled without any booster pumps, we cannot even get water after fixing online motors on the main supply pipes - under advice of the Delhi Jal Board ! Roads are an absolute mess, and just try and get any courtesy out of any government run agency - or any integrity.Even the MTNL telephones appear to crook subscribers - just as the private telephone companies do. Is ths the so called 'good governance' and 'serving us better' promises we get for the exhorbitant taxes we do pay?

Coming back to the specifics of the new direct taxes code - as proposed. Please do try and understand, that when Dr Manmohan Singh (then the Finance M9nister)liberalised the economy in the early 1990's, it (the economy) really took off. Hasn't the present finance minister- and his predecessor - understood this fact. The downturn in the economy is not because of the global recession, but because of the disincentives hammered into the taxpayers - with a big sledgehammer. The taxes imposed since 2006/2007 have made a mockery of everything that liberalisation stood for.

The corporate sector is going to be taxed at 25 % - why? Do you think they like paying huge amounts as taxes - after working so hard to generate such profits, which keep diminishing because of more and more taxes? Small wnder that so much black money is being generated virtually every day.Please remember, if they can save Rs 300 crores by spending Rs 50 crore, why wo 't they ? Much f it will be spent on bribes and smart accountants; and perhapscourt clerks etc to ensure that they escape the net.
Instead of this madness, why does the government not consider SERIOUSLY the option of taxing the corporate sector also at the lower rate of 10 % - yes - at 10 oercent -(or even at 8%) but, 10 percent of TURNOVER (not profits).
Thus, as far as companies are concerned, profits they can keep and distribute as and how they choose - whether to expand, reserves, dividends, bonusses, better facilities, higher wages,social projects - whatever. They have already been taxed on turnover, which the purchaser of the item pays, as this tax is included in the maximum retail price (MRP). Also, the amount which the exchequer gets is also a much higher amount.
More important, the money is more likely to be cheque payments, and therefore, trackable.At present, everything is skewed towards the generation of more and more black money.

The law as regards Capital Gains Tax, especially on the sale of property is really an ass. Until late 2006, the law which Dr Manmohan Singh had instituted as Finance Minister, was still in operation. This meant that on selling a house/property, one could put the money into certain bonds for three years or so, at low interest rates. The interest obtained from these bonds were taxable - as normal income tax, but the capital in these bonds did not attract any tax at all. This gave the person enough capital to invest, set up manufacturing, expand business, or whatever. The great thing about this was that people were accepting up to 90 or even 95 % cheque payment. However, by January 2007, the law was changed, surrepticiously - only Rs50 lakhs could be put into these bonds, and the rest, one would have to pay 23 % capital gains tax. People changed overnight. Since then, no one accepts more than 30 to 40 % cheque payment. Worse, there is stagnation as regards buying and selling property - induced recession ?
Why would anyone accept cheque payment, when he has to pay 23 % capital gains tax, AS WELL AS 6 % REGISTRATION FEE/STAMP DUTY to register the sale/purchase. Thus, various government agencies take away a whopping 29 % of the proceeds ? Is this not being avaricious? Does this not DRIVE people into the black economy ? From what the general public sees, it appears the government WANTS the black economy to flourish and take over the country ?

The total capital gains tax and registration fee/stamp duty shuld never be more than 8 % - which proportion is which, the tax payer doesn't really care - but the two combined must not exceed 8 % - less if you wish, but not more.
It would help if at least this is changed straight away - in that the bonds are brought back, where ALL the sale proceeds (minus what is used to purchase new property) where the interest is taxed, but the principle amount is free of any capital gains tax. If not, a great deal of black money will continue to be generated, and the evils which come with it.

WEALTH TAX SHOULD BE ABOLISHED AND NEVER EVEN CONSIDERED AGAIN - for the same reason - the incentive to make /generate wealth - and be able to keep it, as it has already been taxed -for whatever use he wants to put it to - as long as theurpose is LEGALLY PERMISSIBLE.

Many industries are taxed at many points - at its factory gate,octroi in some places, sales tax, and the like. Surely all this merely puts it all beyond the reach of many people, and makes people anti government.

It is about time government realised that peole need to be encouraged to work - and be honest - and the government MUST SET THE RIGHT EXAMPLE. The governments - central and also state - HAVE TO BE MUCH MORE RESPONSIBLE, AND HONEST with the public, in everything they do. Perhaps that is why the public believes that the tardy nature of the government's approach to the black money stashed away in Swiss accounts (with the Swiss government) is deliberate - to enable such account holders to move their money to other places before our government moves in on them.I wonder why.

If the gvernment is dishonest, why shuld the public be honest as regards paying taxes ? Is there any reason or incentive ?

The reason why other countries work is that even when a high official is caught, he is subject to the same laws as anyone else - he too gets punished. Unfortunately, here, the high and mighty get away, scot free, and small fry suffer.

The lesson from the parabe I have quoted - that the public is fed up - with tossing money into the bottomless pit/well - and government had better start ebing honest, and start working, honestly, and EARN ITS MONEY. The government and the administration/beaurocrats had better start and earn the people's respect-instead of what they have become.

As I mentioned earlier, savings such as PPF and PF are ony meant for the below Rs 3.00 lakh group - for they need the cushion of such a fund for emergencies. If this is taken away, they will suffer, as they are not used t having to put this sum away on their own - it is always done for them, and it is always available. Ths ia a huge amount, on a national scale, and as the government only gives 8 % interest, why should it charge a minimum of 10 % when it is withdrawn?How can this be justified especially as this is only withdrawn when actually needed ? Also, where else can the government get such a huge deposit, at such a low rate of interest ? If EET is introduced, the government can no longer make this compulsory, and there may/will be mass withdrawal. In fact, these instruments are in real danger of becming extinct.

There is one other point I wish to make. Until a few years ago, there were RBI relief bonds, which were TAX FREE. These were a godsend, because they allowed us to be free of the income tax commissioners office/officers. As there was no tax deducted at source, no refunds were forthcoming. I have personally suffered while receiving a tax refund - either the man brings the warrant to your door, and demands a percentage of the refund amount, or he takes it back, and it arrives after the expiry date on the interest warrant, and it had to be taken to the office/officer, and he would not revalidate it unless a higher percantage was handed over - in cash, of course. If these bonds could be brought back, even at 7.5 or 8 %, tax free, if woould be most helpful.The government gets huge deposits for 4 or 5 years, and the tax payer is saved the headache of paperwork, tax office taxes, and so on. The only ones who would grumble at this is the corrupt income tax officers.

The biggest reason for simplifying procedures is so that everyone understands them, and people are not fleeced by unscrupulous accountants/tax officers.

Again, these measures must be given serious consideration- it would not reduce government income by very much - if at all-and create an atmosphere where people do pay taxes, honestly, governments govern honestly and do an honest job, and it gives everyone the incentive to do things for the country. It also could, conceivably, give us all the one thing we lack - belief in us and in India - the PRIDE IN BEING INDIAN - which we , at the moment, sadly lack.

YOURS SINCERELY

ARVIND SWAMINATHAN

We must also understand what is happening. Why are we in such a mess? Well, our finance ministers- with full entourage of babus - be they Secretary, Addtl Secs., Jt Secs, etc, go to Davos in Switzerland every year, to hob-nob with finance ministers of rich/developed countries. There, they teach each other more diabolic ways of squeezing more taxes out of the hapless public, and we are the ones who take it so seriously. These rich or developed ones whisper in the ears of our finance minister, and he/entourage come bck here, and give the public hell.
What our lot haven't grasped as yet is that they are doing to us today what the Brits did pre-1947, and especially during the 19th century. They put a heavy tax on, say Indian textiles, and brought in Lancashire mills textiles, and allowed it to be marketed with no tax being levied on it. The result was that Indian textiles were too expensive to compete, and the mills in centres like Ahmedabad closed down, causing massive unemployment. The indentured labour agents came around, and signed them up for a pittance, and sent them off to 'Devil's Island' - the West Indies, Fiji, Malaya, South Africa, Mauritius. Indentured labour was slavery under another label.Heavy taxation today will/does havethe same effect, in that it causes massive unemployment, except that there is no Devils Island they can go to now.So why is the government of India indulging in this scheme?

The other point is that with taxes climbing higher, the services due in return are getting worse - or non-existent. As an example, before the new system of property tax in Delhi, (UAS), I paid Rs 4,000/- pa as property tax. Services were 'OK' - at least load shedding was announced, and my underground water tank was usually full - and I could maintain a small garden.Under the new (UAS) system, I have to pay about Rs 15,440/- pa, and I don't even get 200 litres of water per day in my underground water tank - and this has been going on since April 24, 2006 - about 31/2 years. I am lucky to get this 200 litres per day - (often, even this does not come) I haveto make up the shortfall by putting a motor directly online - for 2 to 4 hours, just to get other 300 litres I need for the day. If there is no water in either of the two ways, then I have to order an emergency tanker - and that may come the following day - or the 2nd or 3rd day.Until it comes, I am virtually under house arrest, waiting for the tanker to come. All this because in April 2006, the Jal Board cut off the water supply to 50 % of the colony, and those who have huge motors, or can pay the Jal Board, get water - retired people such as myself don't. Is this what I should expect for the huge tax increase I have to put up with? I have to pay almost 4 times what I was paying before, inspite of the Delhi Chief Minister's promise that no one would have to pay more than 2 1/2 times what they were paying before!

So much for politicians promises and the delivery of good governance/better services.

Now, we have to pay huge salaries to politicians/babus(Secs, Ad Secs,Jt Secs, etc), and you all invite comments from us - the public - so that we have to the work as well? Are you all not the same as the Bitish - in that we the public do all the work, and the Sahabs and their entourage takes away all our money and puts it in their accounts - in Cayman Islands/Switzerland? Do you folks have no shame anymore? Todays brown sahabs appear to be a bigger curse than the white sahabs of yesteryear.However, further to my note of yesterday - general comments:

Yesterday, I mentioned - as an example, how and why black money is generated. In fact, I can't sell my house, because no one will give me more than 50 % via cheque payment.

Corporates are no different. If the tax rate is very high, then they too will generate cash /black funds. If the perks are taken away, they will start the old system of cash filled envelopes to employees. If corporate conventions/jaunts are taxed, then they will go in for cash payments. But, this will knock hell out of the hospitality industry, in that hotel occupancy rates will be be hit badly, and cause further unemployment. Also, the ability to attract talented persons into their ranks will also suffer adversely.Most such actions do tend to snowball. For instance, a few years ago, the tourist industry was very badly hit, when the government placed a heavy tariff hike on all ASI monuments. Many tour operators had to cancel, as the notice period was so very short, and tourists went to other holiday spots. Most of them never came back. The worst hit were the artisans - such as those who came to Dilli Haat - as their main sales were to these tourists. Many are now back to poverty stricken lives.But, like the Brits of yesteryear, the government of India ddn't seem to care.

The fall out of the creation of black money syndrome is particularly nasty, and government hasn't appeared to have grasped its significance, and it is a matter of great concern.

The smount of black money is so huge that it brings with it much that is totally not required - and is inherently VERY NASTY.

1. Money laundering
2. Hawala
3. Extortion racket
4. Kidnapping for ransom
5. Dirty politicking
6. Contract murders
7. Law and Order breakdown

Whether we want to admit it or not is irrelevant - all these malaises are directly linked to the blck money economy,and the victims can't even ask for police protection, because the police also want their cut - and these victims then have to account for the source of these funds. Thus, the perpetrators tend to get away. Even servants can't be trusted anymore - they rob and kill their employers, and go to Nepal - or Pakistan/Bangladesh.

Money laundering has also become big business.Converting black money into white for a percentage - within India, has become big business. for obvious reasons.
The external arm of this money laundering is, of course, Hawala. Thus, money can be sent anywhere in the world, for a fee, and that is then used to develop Europe, America - or, very occasionally, a small amount comes back in the form of NRI investments.

The kidnapping for ransom, extortion and protection rackets run by gangs such as Dawood Ibrahim, the Gawlis,and others, often under political partronage is known to any and every 10 year old in the back streets of any medium sized town. They do it because they know that these large amounts of black funds are flying around, and so they take their cut. There is no way of knowing how much, and where it goes, because no one can report it - officially. It is said even the police have to be bribed to help out.
Even when the police catch someone, nothing happens, as political pressure ensures quick release.Thus, even the police are not allowed to do teir job - and when the system is corrupt, they go the same way.Also, as the police personnel are totally untrained, can they do anything else?

Even youngsters from good families go astray - to get easy/quick money, to maintain high living styles. With so much cash, and no way of using it legitimately, drink, women,and crime become the way of getting highs.
Contract killings also become part of the way of life, to gain financially, or for many other reasons, including 'just for kicks'.

What this black economy has done to our moral fibre is something our leadership should have sorted out a long time ago - is it already too late?

Again, I hope this lot of policy will take a long, hard look at what it has done to us in the past- and hopefully, it will do an honest and proper job in the future.

How long will the Indian public put up with this present lot of British type brown sahabs. Also, will the next reaction be in the ghutnehiji mould, or the Russian/Chinese mould. I do hope the goverment takes notice, because the public/natives are getting restless.

These are more general comments - on, perhaps the way the government SHOULD be thinking. I do need time to look at specifics before commenting on the new Direct Tax code as such.


with kind regards

Arvind Swaminathan

reply?

Taxation sould be low enough to ensure that even the rich do not find it worth while to evade/avoid paying it. Taxes must be low enough to make it less profitable to spend time, effort and money in avoidance/evasion. it must be low enough to make it worthwhile to pay it, and get it over with.

One must give people at large enough incentive to work hard and produce/manufacture wealth - and perhaps the best way is to give him the incentive - BY ALLOWING HIM TO KEEP A GOOD ENOUGH PROPORTION OF HIS EARNINGS FOR HIMSELF. This way, he can spend on himself/family, and create employmentfor those industries/services whichhe would spend on - travel, hospitality, handicrafts,cars(with its anciiary industries) and the like. If he does not have such freedom, how can the others who depend on this expenditure earn a living for themselves. Most of these ancilliary industries are run by self starters, not by government agencies. This will take pressure off the government in having to create jobs which are most unproductive, such as 'babus', and social schemes etc. people have to learn to start and get into their own niches - and government HAS TO GET OUT OF THE LICENSE RAJ MODE whichseems to have returned with a vengeance.Let people get on with the job of creating wealth and help them to keep more of it, to create much more wealth.

Also, wealth created MUST be visible - it must be lodged in banks and not as cash- in other words, do try and avoid the creation of BLACK wealth(black money).

A classic example of this 'license raj' type of mentality is th4e cap of Rs 50 lakhs on the sale of property which can be lodged in bonds, where capital gains tax need not be paid. All the rest of the proceeds from the sale of property attracts a capital gains tax of about 23% - minus of course that which is reinvested in purchasing a new bit of property.
The result of this change - since around January 2007,- is that people who were accepting 90% cheque payment, now do not want more than 30 or 40% cheque, and 60 to 70% paymet in cash. In fact, buyers are not prepared to pay more than 50% by cheque.
Does the finance ministry/Govt of India understand just how much black money has been created just by this change in the capital gains tax law? I cannot understand the logic of the finance minister who brought in this tax change, as his avowed intent was to stop/flush out black money.

Also.in the new tas code, the EET system has an obvious drawback - and this is only a first impression.
PF and PPF now comes under EET - which is rather odd- in that when money is put into these it is E from tax upto Rs 3 Lakhs.The interest this gets while it is deposited is 8%. This interest is also E (exempt). Howeve, when this is withdrawn, it attracts 10% income tax - at the lowest rate? This qlso does not make any real sense. Naturally, I am only a layman.
This could result in mass withdrawals - in fact, in the years to come how many people will be stupid enough to invest in these schemes. These funds/schemes were always a buffer for people in times of need - emergencies/savngs, etc for marrieages,education,health pronlems of children, old dependants etc. It also served as a nest-egg for retireent, house building etc.Ever wondered what this could do to the amjority of the population who do't even thin about it, but take it for granted.This has always been a compulsory saving for most people - not only government employees, but also for industrial employes, as well as private sector wrkers. Such folks seldom get pensions, let alone liveable pensions when they need it mst - in their old age.
These are classic examples of how things are messed up, and why black money is in vogue - i.e. fashionable.
The amount to be saved by generatng black money in property sales is so huge, that it pays to evade tax. If the capital gains tax had been 5 to 7 %, people wouldpay it as a matter of course. At 23%, it pays to think of ways to avoind/evade. Another reason is that this 23 % in in addition to the 6% tax/stamp duty levied to register the sale, making it a total of 29% siphoned off by various governmental agencies. Is this even reasonable. Why did ghutnehji find it so much easier to make people break the tax aws? It wasn't ony patriotism or against a foreign power, but that this was the last straw, and the salt tax was so stupid that it was just too much. Why was there no such revopt when the British government put sucha heavy tax n textiles made in India, to enable them to market Lancashire made textiles in India? Because ghutnehiji had not thesame hold on the public, and the leadership was not there. This allowed indentures labour to flourish, which was slavery under another label.Today, the government is behaving like another British Raj by taxing everyone and everything in such a way that only government employees and pol8ticians propser, and the others are kept down just as the British did. Small wondr Naxalism etc take hold and spread, another form of revolution - a violent one, this time.

When the sale from property is put in government bonds for three years, one only gets 5 to 6 % interest, which is taxed as income. This is fair enough, as long as capital gains tax is not levied. The government gets a 3 tear fixed deposit at a very low rate of interest, which is about half of what it would have to pay to get money from the market. Also, the interest is taxed - and ALL the money is in the open, and can be tracked in the future. The government thus does not lose anythig - but to take the person's capital base, to the tune of 29% is not funny. This is not only extootion but also smacks of the British raj in that the Indian public is not alowed to keep its money to put into busines, etc.
To get money at such low interest rates is a godsend. Say the sum put into these bonds is Rs 20 crores. The government only pays out say 5% as interest which is Rs 1 crore. This one croree rupees attracts income tax of 33% - approx Rs 33 lakhs. But it also gets it at this 5% - which means that it has already gained another Rs 1 crore which it has not had to pay - which it would have had to pay for a regular fixed deposit. Doesn't the finance ministry understand this little detail? is the glass half empty or half full?

Yes, it is about time the government learned that it should do something for Indians and for India - and forget the leftovers of the British Raj.Don't squeeze the Indian taxpayer into such a corner that it leaves him no alternative but to evade tax altogether, and maybe even finance a revolution. Give India and Indians a chance to grow - as they did when liberalisation took root in the 1990's.

With regards

Arvind Swaminathan

Reply?

Income Taxes of 20 per cent and 30 per cent are not advisable, as higher income
groups may consider it painful to pay high taxes and there are chances that they
may opt to evade taxes in one way or the other.

Well, Income Tax may be considered to be charged at a single flat rate of 10 per
cent on total Gross Income as TDS just like a Service Tax only, the minimum.

However, for middle class/poor people, this 10 per cent Income Tax on total
gross income may be borne by Employer and Employee in the following ratio:

Gross Income Employer : Employee

upto 50,000 Borne by Employer-Full
50,000 to 1 lac 3 : 1
lac to 1.5 lacs 2 : 2
1.5 lacs to 2 lacs 1 : 3
More than 2 lacs Borne by Employee-Full

There may be lot of retaliation/dissentment from the lower income groups for
paying single 10% Income Tax on Gross Total Income. For them, Government may
consider reduced/lower single slab Income Tax with 2 per cent, 4 per cent, 6 per
cent and 8 per cent on Total Gross Income upto Rs.50,000, Rs.1,00,000,
Rs.1,50,000, Rs.2,00,000 respectively, in the form of TDS.

Incomes from 1. Interest 2. Dividends 3. Short / Long Capital Gain 4. House
Property may be considered to be charged at a single flat rate of 10 per cent
as TDS just like a Service Tax. However, people below the poverty line may be
given exemption of this 10 per cent Tax.

Initial, Income Tax of single flat rate of 10 per cent on total Gross Income as
TDS may be considered to be applicable for employees of Government, Public
Sector Undertakings and Public Limited Companies. Its scope may be further
extended to Private Limited Companies, then firms, then wholesalers, then
retailers and so on.

Wealth Tax may be considered to be abolished.

STT may be considered to be allowed to be continued and may not be considered to
abolish the same.

When all the incomes are charged at a single flat rate of 10 per cent, then
ultimately, the revenue from Income Tax shall definitely be manifold. Then
there are chances of less Tax evasion, less burden of filing returns.

All investments and purchases should be free from any compulsion in liberalized
economy and as such, all Tax Saving Investment Schemes may be considered to be
abolished. People should decide its own priorities with 90 per cent amount
available at its disposal - after paying 10 per cent Income Tax. Then People
shall have the option either to invest the savings or purchase some more
items/things out of the savings. In both the cases, the Government will earn
revenue either in the form of Tax on interests/Dividends or Tax on Excise/Sales
Tax.

You are requested to consider on the above points for a single flat rate of 10
per cent Tax on Total Gross Income.

With regards
Bobby

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