PM Narendra Modi’s ‘New India’ must have a reasonable income tax structure

By: |
Updated: August 16, 2017 5:20:35 PM

Prime minister Narendra Modi tried his level best to show the efforts of his government in the last three years in fighting black money and corruption as impressive in his Independence Day speech, despite the fact that he himself is not satisfied with the results of demonetisation, the biggest move for achieving this goal.

new india, narendra modi new india, narendra modi resolution on independence day, modi independence day speech, income tax structure in india, income tax reformsThere is no doubt that as far as dealing with the black money hoarders and also corruption is concerned, the steps taken by the current government were far better than any other government in the past, both in terms of numbers and sincerity. (Reuters)

new india, narendra modi new india, narendra modi resolution on independence day, modi independence day speech, income tax structure in india, income tax reformsPrime minister Narendra Modi outlined the success and efforts of his government in tackling black money and corruption in the last three years in his Independence Day speech. But, he must understand that while increased surveillance and demonetisation will surely help in tackling tax evasion, there is also an urgent need to restructure the income tax slabs to attract more and more people to pay taxes.

Prime minister Narendra Modi tried his level best to show the efforts of his government in the last three years in fighting black money and corruption as impressive in his Independence Day speech, despite the fact that he himself is not satisfied with the results of demonetisation, the biggest move for achieving this goal.

There is no doubt that as far as dealing with the black money hoarders and also corruption is concerned, the steps taken by the current government were far better than any other government in the past, both in terms of numbers and sincerity. Be it Benami law, demonetisation or even the Goods and Services Tax (GST), all will make tax evasion and accumulation of black money difficult now. PM Modi said that black money worth Rs 1.25 lakh crore has already been unearthed and ‘the culprits would be brought to book and forced to surrender’.

He also added that: “According to the research conducted by outside experts, about Rs 3 lakh crore that had never come into the banking system before, has been brought into the system after the demonetisation. More than Rs 1.75 lakh crore deposited in the banks is under the scanner. Black money worth Rs 2 lakh crore had to be deposited in the banks and this system has forced them to be accountable.”

All this clearly shows that the fight against black money is a work in progress and the income tax department and other investigating agencies will have to work tirelessly to get hold of the culprits and collect legitimate tax from them. But, PM Modi’s job doesn’t end with this crackdown on tax evasion and the black money that has already got accumulated. To curb tax evasion and creation of black money in the future, he will have to restructure the income tax slabs on the lines proposed in the initial Direct Taxes Code (DTC), which has been junked. If the top income tax rate of 30% kicks in at a low annual income of Rs 10 lakh, which is the case at present, it only forces people to find ways to avoid paying taxes, which is evident from the personal income tax payments.

After the changes made in this year’s budget, the income between Rs 2.5 lakh and Rs 5 lakh is taxed at 5% and between Rs 5 lakh and Rs 10 lakh, at 20%. This needs to change. If the government can’t increase the limit for the top 30% rate from Rs 10 lakh to Rs 25 lakh in one go, as suggested by the DTC 2009, it must look at raising it to that level in a gradual manner, with suitable changes in the lower brackets.

Along with the removal of the plethora of exemptions that are available now, income tax slab restructuring will not only expand the taxpayer base, it will, in all probability, increase the tax collection substantially also because of the reduction in tax evasion.

PM Modi must ask finance minister Arun Jaitley to initiate a public discussion on this quickly so that the government has adequate time to bring in changes in the next budget.

Get live Stock Prices from BSE and NSE and latest NAV, portfolio of Mutual Funds, calculate your tax by Income Tax Calculator, know market’s Top Gainers, Top Losers & Best Equity Funds. Like us on Facebook and follow us on Twitter.

Next Stories
1How flip-flops on sugar imports to bring down prices led to rates being stuck in Rs 40-Rs 45/kg range
2Artificial intelligence: Why Elon Musk saying it is worse than nuclear war sounds like hyperbole
3Economic freedom: PM Narendra Modi identifies problem rightly, India needs market reforms