Few simple but effective Pre-Budget Suggestions for Direct taxes

To: "Shri Sumit Bose - Revenue Secretary" <rsecy@nic.in>
Sent: Friday, December 28, 2012 1:31 PM
Subject: Few simple but effective Pre-Budget Suggestions for Direct taxes

Dear Shri Sumit Bose (23092653, 23092111 Ext:-5353),

Government is helplessly reeling under pressure to achieve +8% growth under bad economic conditions all over.

Under such circumstance it is required to think of radical measures to increase revenue collection and reduce inefficient operations of government.

Please find enclosed my 3 simple suggestions that will bring following benefits to Indian Government:

1. Increase revenue by making rich people pay taxes proportionate to their income
2. Increase Service tax collection based on negative list by re-deploying Income tax employees to Service tax
3. Free small businesses from the clutch of direct tax machinery by making them pay taxes proportional to their real income.

Income Tax exemption on Farm Income
Currently farmers are exempted from Income tax. This has been a policy since independence. Due to this exemption many rich and influential people have become ‘farmer’ on paper – thus leading to tremendous loss to the exchequer. While in fact, real farmers are committing suicide for want to reasonable income.

The benefit of Income Tax Exemption on Farm Income should be abolished.

There is a clear and gross mis-use of Income tax exemption by rich and influential people for the detriment of economy. Time has come to plug loop hole.
Tax Deducted at Source
Almost 55% of Direct tax revenue is collected by way of TDS. This has made Income tax payment almost redundant.

TDS merely serves to make tax collection faster. Also, both tax payer as well government machinery is set-up to see that TDS system works efficiently.

On the other hand lakhs of small people – who are outside the ambit of Income tax loose their income because they never claim refund of TDS deducted.

Abolish Tax Deducted at Source.

Honest tax payer will be relieved from the heavy burden of tax collection, payment along with attendant paper work.

Government machinery will be saved from the unproductive work of getting income tax before its time.

In fact, now such machinery can be deployed in CBEC (Indirect Tax) for collection Negative list based Service tax.
Small Business subjected to Presumptive Tax on 8% of Turnover or Gross Receipts u/s 44-AD (read with 44ab)

Government loses tax revenue when a small business’ income is more than 8% of turn-over.

Many small businesses have income less than 8% of turn-over; in fact, some times even loss also. All such businesses are subjected to compulsory audit u/s 44ab.

Abolish Section 44-AD


Reduce Presumptive tax on 8% to 5%.

It is irrational to assume that small businesses earn 8% or more of Turn-over or Gross Receipts. In many cases it is less than 8% due to increased competition and increased day to day expenses. In such cases he is compulsorily subjected to audit u/s 44ab – costing Rs.15,000/- to 50,000/-.


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