In a recent address to tax officials Prime Minister Narendra Modi suggested to target ten crore people to be brought under income tax net. IE has been pointing to the very small number, a little over three crore of income tax assessees. For several decades, IE has been suggesting such a target; initially to bring 10 per cent of the population under the tax net and increase this progressively to around 25 per cent. Thus we find Prime Minister’s suggestion specially welcome and extremely necessary.
Just think of it. With economic growth benefitting increasing numbers of middle class, even more than those at the lower level, does this not appear incongruent and even absurd, that just around three crore of the population should file income tax returns? Several attempts made earlier have not met with great success. The 1/6 formula that stipulated compulsory filing of returns by people owning housing property, car, telephone… introduced by P Chidambaram as Finance Minister did not meet with much success. The presumptive tax proposed by Dr Manmohan Singh as Finance Minister that stipulated a very modest tax, of around Rs 1400, for small businesses was again resisted and the proposal was withdrawn. Looking at the prosperity of professionals like doctors, chartered accountants, lawyers… and thousands of small businesses, one wonders the small level of just three crore as totally unreal.
Such efforts in the past have been nullified by the glamour for increasing the threshold limit for income tax from time to time. IE has been suggesting a gradation of tax rates with low rates for those in the lower income brackets. IE has been pointing to the system in the US that ensures deduction of tax at the payment stage even on a temporary employee working, for instance, at a McDonald outlet for a few hours. There is hope that the GST appeared to be on the threshold of getting passed, would also help bring much larger sections of the population under the tax net.