let the sacred moment of demonetisation, and later re-monetisation, that has come, lead to the purification of the system. The Modi Government must act with a large heart and offer income tax concessions. Else, there could be disaster ahead for the common man
The note-ban is a sacred movement and will lead to a clean economy, the BJP national executive held in the beginning of the 2017 new year said. It was a momentous decision. All future references to the Indian economy would be made in terms of November 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 Union Minister for Finance 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". There are, he says, 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 lakh rupees, 52 lakh income of up to Rs 10 lakh and only 24 lakh above Rs 10 lakh.
This has led to stormy discussions. Does this country have such poor individual incomesIJ 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 per cent is levied over an income of approximately above Rs 80,000 a month, 20 per cent tax on income above Rs 45,000 a month and 10 per cent above Rs 24,000 a month.
The bulk of the income tax 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 tax 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 dearness allowance, medical reimbursements and provident fund (PF). In many cases, the employees themselves are forced also to pay the employer’s share of the PF and insurance. 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 Government institutions as large number of the employees are outsourced to contractors. Some cash refunds are also paid by the contractors to a few Government employees, it is alleged. 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. Governments are voted by these poor people in expectation that every new regime would do something for them. Even demonetisation has not helped them. Can any demonetisation stop this massive generation of black money by all kinds of employersIJ
The country needs to realise that real wages are not that which are shown on papers. If that is taken into account, the actual tax-payee (over 90 per cent are employees) would be less than three crores. A discreet survey by National Sample Survey Office (NSSO) may be able to unravel the truth but may be not the whole truth. These hapless and unfortunate employees need immediate Government attention and immediate intervention.
Many of these 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 the bank counters. They lost wages too in the process. 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 lakh to Rs 40 lakh over two decades or more in large currency notes. It was not black money.
The country needs to understand the age-old savings practice. The heartless Income Tax department considers all these savings as black money. It is touting that it has spotted four lakh crore rupees as black income in the post-demonetised bank deposits. Nothing possibly can be more erroneous than this.
Business groups and individuals are today murmuring but apprehensive of raising their voice as tax raids have increased. This is not glorifying the nation. Many of these raids are conducted for purposes other than ‘unearthing black income’, trade organisations say 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 one lakh rupees 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 Reserve Bank of India Governor explain why should a Government cheque bounce cost the account holder Rs 300 or more in penalties, apart from other charges being leviedIJ Would he explain why some banks are levying charges on cash depositsIJ Why cannot banks be told to shut shops if they cannot handle cashIJ
People want a friendly Government, banking and other institutions. Stringent rules lead to larger corruption. The Government needs to simplify rules and taxes. This calls for a re-look at the levy of income tax itself. 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 personal income tax is gradually abolished and banking rules and charges are kept to a minimum. It would unleash huge money flow and lead to more productive expenses by people. It would cause a massive, approximately two lakh crore-rupee savings on income tax collection paraphernalia.
let the sacred moment that has come leads to purify the system and the Government act with larger heart, else there is disaster ahead.
(The writer is a senior journalist)