Even tax experts believe that income tax rates are high in India and the tax compliance will increase if the people are given some incentives in the form of lower taxes.
One of the reasons why most people are reluctant to pay tax in India is they think that the tax rates are very high, and also that the money they pay in taxes is not properly utilised by the government for the welfare of the people of this country. While people need to be educated on this, even tax experts believe that income tax rates are high in India and the tax compliance will increase if the people are given some incentives in the form of lower taxes.
“It is very important that the government look at all possible ways it can to reduce the tax burden on the taxpayers. The taxpayer should be motivated to be self-compliant than forcing him to pay high taxes,” says Chetan Chandak, Head of Tax Research, H&R Block India.
It can be achieved in various ways. Some of them are mentioned below:
1. Widening the taxpayers’ base by tapping tax evaders: Incentivising digital transactions by reducing transaction costs, lowering tax (direct and indirect) on receipt/income generated through digital means and giving incentives to the person who opts for the digital transaction can help the government in tapping the revenue leakage. “It will also help in increasing its revenue which in turn can help it in reducing the tax rates further,” says Chandak.
2. Incentivising Indian entities to repatriate their profits retained outside India by taxing it at a concessional rate. This will pump up additional investment in the Indian economy and also help the government in generating higher revenue in its objective to reduce taxes.
3. Reducing the tax rates for the entities engaged in the export of goods or services will provide them with a competitive edge in the global market, and it will mean increased flow of foreign exchange earning for the country.
4. Removing the cap on the limit for setting-off housing loan interest in case of rented properties or “at least increasing the deduction to Rs 5 lakh in case of single property will help the government to boost the growth of real estate sector, creating new employment opportunities,” says Chandak.
5. Extending the benefit of presumptive taxation u/s 44ADA to all small professionals in place of restricting it to certain specified professionals only. This will improve tax compliance and also widen the taxpayer base.
There are many other ways to reduce the tax burden on the taxpayers. However, even if these five things are done in the Budget 2018, then it will provide some relief to the taxpayers and also help the government collect more taxes.