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New Fiscal Approach Needed For Govt Revenue Collection
Through the proposed DTC / GST legislations, the Government has acknowledged the need of new revenue system but the proposed new laws apparently appear to be even more complicated then the present one.
India needs a very very simple legal system, which can be understood and complied by all concerned. The revenue collection laws can be consolidated and written in just one hundred pages instead of over fifty thousands pages in present law, using the following guidelines.
The New fiscal System can be implemented on the followings lines.
1. Consolidation of Old Revenue Acts
Income Tax, Wealth Tax, Service Tax, Security Transaction Tax, Dividend Distribution Tax, VAT, Excise, Customs Acts etc. to be reviewed and consolidated in one single act on the following lines called “The Consolidated Revenue Act of India”.
2. New Revenue Act:
The “Consolidate Revenue Act of India” can be formatted on the following lines broadly.
3 A. Direct Taxation
3 A 1. Basic Income Tax exemption to all individuals up to Rs. 4,00,000/- and to all others Rs.2,00,000/-
3 A 2. No discrimination or classification of income. Accounts for the purpose of revenue (tax computation purpose) should be independently drawn. Source and place of earning not important for tax purposes.
3 A 3. All individuals to pay tax @ 15.00 % of the income over first Rs. 4,00,000/-. No slabs, no deductions, no exemptions, no incentives and no allowances.No distinction in the nature and source of income.
3 A 4. Other then individuals, all other resident assesses to pay tax @ 18.00% of the income. All non – residents and institutions with foreign ownership of more then 25% to pay tax @ 25%.
3 A 5. Accounting Year should be calendar year to globalize the system.
3 A 6. Advance tax to be paid at the end of each quarter. Installments to be equally divided. Difference if any at the end of the year, allowed to be deposited before the filing of Income Tax Return subject to the condition that, the difference will no exceed 20% of the total tax payment.
3 A 7. Income and expenses to be taken in computation on cash basis & not on accrual basis. This will reduce accounting manipulations and complications. No deductions be allowed from the income. Only business income will be allowed deduction of expenses incurred for carrying the business activity.
3 A 8. Depreciation on all the fixed assets to be calculated @
10% on straight line method only. Classification of assets not required for the purpose of depreciation.
3 A 9. No carry forward / set off of losses for anyone.
3 A 10. All tax returns to be filed on or before 31st March as the accounting year ends on 31st December.
3 A 11. All assessments should be completed within one year from the date of receipt of the returns.
3 A 12. All returns to carry a statement of income, assets & liabilities.
3 A 13. The returns should be selected for verification using only random computer picking method. Department must verify at least 10% cases rigorously. Assessing officer should conduct at least a part of the assessment proceedings at the premises of assesses.
3 A 14. All returns to be certified by Chartered Accountants. They should not only draft the returns but also verify the facts and figures given in the statements.
3 A 15. Verifications (Scrutiny) of Income Tax Returns should be conducted on the basis of standardized questionnaire valid for the entire country. Questionnaire should be dexterously drafted so that all facts are crosschecked in questionnaire itself automatically.
3 A 16. All assessment orders should be signed by three officers i.e. Joint Commissioner Income Tax, Assessing Officer and an Inspector.
3 A 17. Assesses can make only one appeal against the order of the department to an Appellate Authority (Bench of 11 members). Order of Appellate Authority should not be further appealable. Appellate Tribunals should be setup in reasonable numbers. Members of tribunal should be nominated by professional bodies and the Government. All appeals should be settled in maximum three hearings or a period of six months from the date of the filing of the appeal.
3 A 18. Incase of default / delay in payment of tax on time assesses should be charged interest @ 24%.
3 A 19. In case, Assessing Officer or the Appellate Authority discovers willful negligence or tax evasion assesses should also be subject to prosecution (imprisonment) of minimum one week.
3 A 20. Chartered Accountant certifying returns / balance sheet should also be accountable to their work directly. If they are noticed to be guilty of professional misconduct, negligence, they should also be subject to strict action including cancellation of their recognition.
3 A 21. All Government executives should declare their family assets as on 31st December every year. A separate authority should be created to check these statements on random basis. The definition of family should include assets owned as an individual, as member of HUF, Assets controlled as trustees and assets of dependent family members etc.
3 A 22. Farmers and agricultural companies earning agricultural income in excess of Rs. 4,00,000 should also be subject to all taxes like any other entity.
3 A 23. In all the case TDS should be deducted @ 15% from payments like salaries, interest, rent, winnings, dividends etc.
3 A 24. Any individual living in the country for less than 180 days in a calendar year should be treated as Non-Resident Indian. All others are Residents.
3 A 25. Income earned by non – resident outside India not to be taxed in India irrespective of the duration of their stay in India. All residents will be subject to tax on their foreign income, subject to double taxation agreements with individual nations.
3 A 26. Capital gains should be taxed like any other income. Capital gain should be calculated on the basis of net sale price less net purchase price. If the asset sold, was not purchased by the seller, the entire sale price to be treated as income.
3 A 27. Dividend income should be taxed as any other income.
3 A 28. Non-filing / Late filing of returns to attract minimum fine of Rs. 1000/- or 50% of tax and interest due whichever is more.
3 A 29. All kinds donations to be allowed as business expenditure subject to maximum 5% of the taxable income.
3 A 30. All money gifts to be treated as normal income. All marriage gifts to be taxed as normal income irrespective of donor. Gifts in kind in excess of Rs. 50,000/- to be taxed as normal income.
3 A 31. Wealth tax to be charged at 2.00% of net wealth in excess of Rs. 1,00,00,000/-. The wealth means only land without building, unutilized real estate, jewellary and cash. Rest of all assets should be exempted. The logic behind taxation of wealth should be discouraging the people from investing in unproductive assets.
3 A 32. Estate duty should be charged @ 5.00% of net wealth inherited if it exceeds Rs. 5,00,00,000/-.
3 A 33. Raids & Surveys should only be undertaken in unavoidable circumstances with the specific permission of Chief Commissioners & Chairman CBDT. Officers recommending raid proposals should be accountable. Details of Raids / Surveys conducted and their final results should be placed in the Parliament.
3 A 34. Anyone in possession of cash in excess of Rs. 10,00,000 without proper explanation should also be subject of police action and enquiry also.
3 A 35. One individual should be allowed to open maximum two bank accounts in one city.
3 B Other Taxes.
3 B 1. Excise Duty, Custom Duty and Service Tax should be charged @ 8% of the turnover / value of services, where annual sale is in excess of Rs. 1,00,000,000/- or the value of services rendered is in excess of 20,00,000/-. No exceptions & no exemptions, no classifications. Every business should fall in one of the category.
3 B 2 MODVAT credit to be allowed.
3 B 3 Provisions regarding assessment, interest, appeal, etc. can be common and same as applicable to direct taxes.
4. General Provisions.
4. A. Cheque Bouncing should be treated as a criminal offence. Punishment u/s 138 is not sufficient. More strict & enforceable law required.
4. B Individual loan defaulters and all directors of defaulting companies should be blacklisted and their names be published on 1st January every year in the national newspapers and on the government website. Passport of all such persons should be confiscated. No further loans to be granted. Action under any other law also possible. Withdrawal of voting right etc.
4. C. A special status should be given to all citizens who have achieved exceptional success in their business or profession. The criteria of selection could be anyone of the following:
4 C 1. Chairman of the company employing more than 10,000 persons.
4 C 2. Capital employment of more than 5,000 cr.
4 C 3. Corporate income tax contribution of more than 500 cr.
4 C 4 Corporate excise duty / customs payment of more than 500 cr.
4 C 5. Individual tax contribution of more than 10 cr.
4 C 6. Corporate Exporting more than 5,000 cr.
4 C 7. Corporate Imports more than 10,000 cr.
4 C 8. Turnover more than 50,000 cr.
4. D Special Status Scheme should entitle the person for the following privileges:
4. D.1 Business award by the President
4. D.2. Diplomatic Status for the Chairman of such corporate
4. D.3. Free Personal Security by Government
4. D.4 Central Cabinet Member Status
4. D.5. Blue Light Vehicle.
4. D.6. Etc.
If the political and bureaucratic establishments agree to implement the new system on the lines mentioned above, India will have the most transparent and efficient revenue collection machinery working without any kind of policing, coercion, compulsion. It may inspire many other national economies to adopt a similar system.
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