We often hear the elegy that in a country of 135 crore, a mere 1.5 crore people pay income tax, despite three times that number filing returns. The answer is not far to seek however. From the beginning, we have exempted agricultural income from income tax on the specious grounds that agriculture is a subject of the state. This removes about 60% of the population from the income tax burden at a stroke, although in fairness it must be admitted that many of them may not have taxable income. But what about those with taxable income?
Similarly, we have granted a general exemption to charitable and religious trusts. So much so that most educational institutions and hospitals are run by trusts. There is no charity practiced by them with the highest court in the land saying that charity need not underpin their existence to qualify for the exemption. They charge huge tuition fees and mind-numbing hospitalization bills and make handsome profits, yet thumb their noses at the taxman.
This then is the crux of the problem. Moreover, even today, women do not earn money, except in urban areas to a small or great extent, and the children we have in large numbers do not earn either. Elderly people whose tribe grows through longevity also do not pay income tax because they have exceeded their income days.
It’s human to flaunt. You can hide your income, but you simply cannot hide your home and means of transport. If he lives in a posh neighborhood with all the trappings of wealth, he should be presumed to have enough income to support his lavish lifestyle. Such an assumption can in no way be called unrealistic or exaggerated. In such a milieu, the taxman would stop being obsessed with the working class, the sitting ducks, and turn their attention more productively to repeat offenders.
— S. Murlidharan is a CA by training and writes on economic issues, tax and trade laws. The opinions expressed in the article are his own.
(Edited by : Ajay Vaishnav)