By Kamal Baruah
With the start of the fiscal year from April 1, the fiscal clock is starting to tick again and citizens have expressed their dissatisfaction with the TDS (tax deduction at source) of annuity, salary and interest while the banks deduct the tax on behalf of the Indian government. The concept of TDS is to collect the tax from the very source of the income and pay it to the account of the ITD (Income Tax Department). But many people ask the question ‘why should I pay taxes?’ because they pay for their food, their house, their trips, their medical care, road tax and so on. Even on the national highways, you have to pay a toll tax.
The conflict in Ukraine is placing additional economic pressure around the world on a system strained by Covid-19. Inflation eats away at the purchasing power of money. People are looking forward to further tax relief from the Union budget as they feel the tax rates are quite high, but even the government is trying to juggle many hats and find the right balance to meet the expectations of the common man, inflation and taxation. deficit. The counter-question would be that if the government maintains zero inflation, there is no need for DA hikes. The government justified the rise in AD on the basis of the inflation number for government employees and pensioners, but this is not the case with the rest of India. The common man struggles to manage household expenses due to an alarming rise in prices.
India’s personal taxation was liberalized after the recommendation of the Tax Reform Committee in 1991. The top marginal rate fell from a jaw-dropping 97.5% in the 1970s to a much more manageable 30.9% today. today. Yet it has just over 6.25% taxpayers, including individuals and corporations. Although the rates are now lowered, the country does not have the desired tax culture. Americans and British have contributed their earnings to income tax to have access to social security and medical facilities at virtually no cost, but India does not offer such facilities. Health care should be provided by the government to all citizens. However, taxes are used by the government to implement various social welfare programs.
India’s huge rural and underground economies are due to many reasons. People don’t even earn enough to qualify for the income tax slab. Half of India’s working population is owned by the richest 10% of its population, while 95% earn less than L8L a year, which has resulted in so many not filing ITRs (statement income tax). It is also a human tendency to avoid tax or at least to minimize the tax payable. Seniors are protesting more and more against the increase in the tax burden. They blame the tax system which is complicated, while there are exemptions in many articles. Pensions received from former MPs and MPs are not treated as wages but as other income, so no TDS. But other Indians pay 5%, 20% or 30% for slabs between 2.5L-5L, 5L-10L, 10L above respectively. There is a tax refund of up to Rs. 12,500 on winning up to 5L. The 2020 finance law introduced a new optional tax regime at 5%, 10%, 15%, 20%, 25%, 30% for between 2.5L-5L, 5L-7.5L, 7.5L-10L, 10L-12.5 L, 2.5L-15L and 15L above respectively.
Direct tax accounts for a significant portion of India’s tax revenue, where every rupee comes from income tax (15p), corporation tax (15p), GST (16p) and customs (5p). Citizens point out that the tax department treats them harshly with punitive provisions in tax laws. There are also various penalties such as failure to comply with the notice, calculation of under-declaration and misdeclaration of income, income from undisclosed sources and receipt of an amount of Rs. 2L or more cash. Filers find themselves in a panic situation for failing to provide an ITR on time or for paying a fine of Rs. 10,000.
But don’t worry – maybe we can get over this. Apart from designing penalty provisions, the Income Tax Act contains provisions to grant relief from penalty in genuine/meritorious cases under the jurisdiction of the Chief Commissioner or Commissioner of Income Tax. You have to be very careful when declaring income to pay the tax and provide the ITR within the prescribed time. Failure or delay in the performance of its obligation may result in the levying of interest and penalties. ITD divides income into salary, home ownership, business/occupation, capital gain and other sources. Interest from DFs, savings banks, securities, computer refunds, gifts, lottery winnings, dividends and family pension are some examples of income from other sources.
Now is the time to make investments with sound tax planning by avoiding unnecessary taxes. Tax expenditures could be minimized by estimating annual income and carefully considering all available avenues. Tax-saving investments are generally long-term in nature with certain lock-up periods. Instruments should be chosen carefully so that, in addition to tax savings, these instruments also meet long-term financial goals. PPF, FDs, NPS, SCSS, Life Insurance, Health Insurance and ELSS are the most popular investments under Section 80C to get the most out of them.
A person can continue with the existing tax system and benefit from the common deductions of sections 80C, 80D, etc. Alternatively, it can opt for the new concessional tax regime without any commonly used tax deductions or exemptions. The government did not offer any tax relief to individuals in the last budget because it wants to encourage more people to switch to the new tax system. In fact, the new tax regime may benefit those who only use 80C to save tax under the old regime. Taxpayers end up paying a self-assessment tax penalty before filing computer returns for not paying withholding tax quarterly.
The Income Tax Act 1961 came into force on April 1, 1962. India’s direct taxation as it is known today has been in effect in one form or another even since the Antiquity. There are references to both Manu-Smriti and Arthasastra to a variety of tax measures. It is only for the good of the people that a government collects taxes from them, just as the sun draws moisture from the earth to make it a thousand times greater. So take your mark on July 31, usually the deadline to file an ITR for individuals and non-audit cases and be prepared to collect TDS Certificate Form No. 16/16A from deductors such as Bank/Treasury and 26 -AS of TRACES for happy e-filing/e-verifying this time. And don’t forget to link Aadhaar with PAN by texting otherwise you risk another penalty.