oppn parties Tax Time Must Not Be Taxing Time

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  • Maratha quota bill likely to be tabled in Maharashtra assembly today
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  • Supreme Court junks Sandeshkhali petition, says it cannot be compared to Manipur, asks petitioner to approach Calcutta HC
  • Supreme Court gets tough on Chandigarh mayoral elections, asks for ballot papers and video footage, does not order re-election
  • Government starts withdrawing old small tax demands, up to Rs 25000 per entry till FY 2009-10 and up to Rs 10000 per entry from FY 2010-11 to FY 2014-15 with an overall ceiling of Rs 1 lakh per tax payer
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  • SP leader Salim Sherwani, miffed at no Muslim candidate given RS ticket, quits party
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  • Mamata Banerjee says the BJP is doing nothing to resolve the Sandeshkhali dispute but instead fanning the fires to escalate it
History created in Supreme Court as Chandigarh mayoral poll ballots counted in court, judges declare AAP candidate Kuldeep Kumar winner after taking into account the votes defaced by returning officer Anil Masih
oppn parties
Tax Time Must Not Be Taxing Time

By Sunil Garodia
First publised on 2021-09-13 07:05:04

About the Author

Sunil Garodia Editor-in-Chief of indiacommentary.com. Current Affairs analyst and political commentator.

The Supreme Court is spot on in saying that a tax regime must be well-defined and certain with no room for presumption to ensure compliance, maximization of revenue and minimization of litigation. The court said that "it needs to be observed here that in the taxation regime, there is no room for presumption and nothing can be taken to be implied. The tax an individual or a corporate is required to pay is a matter of planning for the taxpayer and the Government should endevour to keep it convenient and simple to achieve maximization of compliance." India ranks 37th out of 57 countries in the Tax Complexity Index.

In India, the problem is that even though the government is committed to tax reforms and there have been major reforms from the nineties onwards, the plethora of exemptions and deductions create a system that is complex, open to different interpretations and leads to litigation. Further, tax officials are given to take arbitrary decisions when allowing or disallowing these exemptions and deductions in various cases and nothing is certain due to the complex nature of the tax laws.

To make the laws simple, it is necessary to do away with all such deductions and exemptions. To compensate the taxpayer, the threshold for tax free income should be increased. The only problem in this changed system will be that savings will not be channelized in certain specified instruments like life insurance, public provident fund etc. which are attractive avenues for savings mainly because they provide tax breaks. But one thing is sure: doing away with exemptions and deductions will reduce complexity and ensure better compliance as well as reduce litigation.

As of now, the tax payer and the tax department are pitted as adversaries. This has to change. But this can only change, as the Supreme Court has rightly said, when the tax laws are simple and certain, leaving no room for presumption. The onus is upon the government to design laws that tax incomes in such a way that the taxpayer does not feel threatened and the tax officials do not treat them as cheats and fraudsters out to deprive the sarkar of its rightful revenue.