Dear Mr Arun Jaitley,
India is aggressively pushing itself as a business-friendly location. Make-in-India is being popularized by Prime Minister Narendra Modi all over the world, inviting companies to set up shop in India. We are trying to improve our position in the Ease of doing business rankings as fast as possible. You yourself have made many such statements that India will follow a non-adversarial, stable tax regime. That retrospective taxation will be a thing of the past. But unfortunately your actions do not match your words.
Recently we have seen a $3.3 billion notice slapped on Cairn India for a transaction which took place in 2007. And over a 100 FIIs have been issued tax notices worth $6 billion. While such notices harm India’s image in the eyes of big investors, they do not directly affect India’s common man. What did affect was your sudden and abrupt introduction of a host of changes in the Tax Audit Report just a couple of months before its due date. You did extend the due date, but as a practising Chartered Accountant, I can assure you we faced severe difficulties in complying with such sudden sweeping changes in a short span of time. And you sir lost a lot of goodwill, atleast among the medium size businesses who were affected by the above change.
Let us come to your Budget 2015. There was almost nothing in it for the salaried class, the small tax payers. Nothing. Not any substantive tax benefit. Even a token decrease in tax would have been enough to satisfy the common man, but common sense eluded you. On the other hand, Service Tax was hiked to 14%. I know it was done to get in line with GST next year, but the next step left me stunned. You added 2% to this 14% under Swacch Bharat Cess. As the budget is worded, this makes it 14% + 2% = 16% on all services. Ideally, this 2% should have been on 14% i.e. total rate should have been 14.28% but since there is no clarification yet, we are still guessing.
Some of the goodwill was earned back by your thrust to GST and the Anti-black money bill, but all this will be undone by your latest salvo fired at the salaried class. In a notification dated 15/04/2015, you have managed to extend Tax Terrorism to the lowest strata of people. You now expect the smallest of smallest tax payers to furnish details of ALL BANK ACCOUNTS held by them. Why? Don’t you already know all this? Most bank accounts are already linked to the PAN, so you already have the information. Why don’t you make Bank update their KYC records and insist on PAN details for all?
And what is the use of all this? Bank already deducts TDS on any Interest above Rs 10000. This directly gets captured in IT records. The amount which may escape TDS and taxation is the Interest below Rs 10000. It is foolish for the Government to go after such small amounts . Instead of reducing hindrances and promoting higher compliance, you are making it harder for honest Indians to file their Tax returns. Of course, needless to say, laws for India’s largest reservoir of Black Money, Real Estate, are still not being tightened.
The logic given is hilarious: You want to tackle black money. Dear Sir, does anyone having black money put it in banks? Then why ask details of ALL my bank accounts? And you are asking this even from salaried class. Does salaried class have any black money? Even the poor fellow who earns only bank interest and files a tax return only to get a refund, now has to go through an exercise supposedly meant to catch black money?
You also now want us to tell you details of our Foreign Travels. Why? Why does the Government need to know where I went for a holiday and how much I spent on it? As long as my Income is taxed at the proper rates the Government has no business asking for details of my personal expenditure. This is a gross violation of privacy. Again, this rule has been extended to the salaried class too, instead of keeping it only for the high income zone.
As far as all the talk of “friendly tax regime” is going on, there is zero movement on the ground. Tax Officers are still given targets, they still harass tax payers, my own clients keep getting frivolous orders. And I wont even mention the corruption, because it will take much more time to come down. As far as the hilariously idiotic Central Processing Centre at Bangalore is concerned, it keeps churning non-nonsensical notices without the slightest application of mind on a daily basis to the smallest of smallest tax payers. In fact people are getting notices for incomes of over 10 years back:
Someone I know got a tax demand notice for 2003-04 income. Nice
— Debashis Basu (@Moneylifers) April 17, 2015
In college, we were taught the Pareto principle, also called the 80-20 rule which states roughly 80% of effects come from only 20% of causes. Hence we were told to focus on this 20% of causes. In Tax terms, I am pretty sure at-least 80% of tax revenues comes from the 20% High Income sector, whereas just 20% comes from the large salaried middle class. In your case you have foolishly gone after the 80% of the tax payers, who contribute a pittance to tax revenues. This will only lead to lower compliance and shrinking tax base, setting us back even more. I hope you reconsider this absurd decision.
– A Tax Payer and Chartered Accountant