The taxpayer and the trauma of July
July, when tax returns have to be filed for the financial year that has just gone by, is a traumatic period for most Indian tax payers. Last year, 6.77 crore income-tax returns (ITRs) were filed by July 31. Although income tax compliance and the number of people filing tax returns are expected to surpass last year’s figures, the number of people with zero tax incidence has grown faster. Data presented to parliament shows just about 1-2% of all Indians actually pay income tax. Businesses avail set-offs against expenses shaving off a large part of their taxable earnings; agriculturists pay zero tax; political parties don’t pay any tax either; even the multi-crore Indian Premier League (IPL) pays nothing. Only salaried personnel bear a large portion of the burden, which worsens when they retire.
Despite a few condescending concessions towards senior citizens, most retirees find the income tax paid by them increasingly becoming a traumatic form of forced charity.
Salaried individuals are increasingly in a quandary: 30% of their salary is taken away upfront as income tax, and out of the balance left for spending, GST ranging from 5 to 28% is further taken away based on purchases, be it basic bread and butter or fancy goods. If they manage to invest what is left over, a capital gains tax ranging from 20% to 12.5% is squeezed out depending on the duration of their investment. What do these 1-2% income-tax-paying Indians get in return? Public education right from school level to colleges has disappeared from the lives of the urban middle class. So also public health care: The pitiable state of most government hospitals compels tax payers to depend on private hospitals despite their exorbitant charges.
In most Indian cities, water nowadays comes from private bore wells or water tankers, compelling the taxpayer to also pay for clean water. It appears that tax payers don’t depend on the police and instead pay for themselves and their family’s security by hiring guards and security staff. Travel by road revolves around toll booths for the taxpayer to pay the toll; airports require user development fees.
Salary earners, especially from the private sector, pay tax all through their work lives without any social security net. This tax doesn’t get them a pension, unemployment support, or any post-retirement health care benefit. Topping it all after paying all that tax, the salary earner finds his tax money squandered in wasteful public expenditure and corruption decided on the basis of populism and vote-bank considerations. No wonder several memes with parenting tips float on the internet, asking parents to teach kids about taxes by eating 30% of their ice cream before them, later periodically scooping out more to explain indirect tax. They should remember to take the first bite every time before the child so that she is well prepared for paying ‘TDS’ later in her adult life!
The process of paying tax isn’t easy either. The number of glitches on the income tax portal can’t all be blamed on the large number of last-minute tax filers alone. Slow speed of the portal while loading a page, failure to upload due to unexpected errors, non-responsive pages, no response from administrators to request a one-time password, and lack of updated data in AIS, TIS, and 26AS forms are ongoing issues. With ITRs processed quickly, differences between the ‘Income Tax Return’ and non-updated AIS/TIS/26AS forms are immediately returned as errors and notices for rectification under various sections issued, even as the tax portal itself is subpar and not functioning smoothly. Why can’t it at least function like the government’s ‘Passport Seva’ portal, where a different IT services firm normally does a splendid job?
With a government unwilling to treat salaried taxpayers on par with businessmen whose income tax is charged on net profit, never on gross business income, unlike the gross income of salaried individuals taxed without deducting expenses incurred, the largest head of most salaried tax payers is the tax paid to the government.
Thankfully, pompous appreciation certificates from the department have stopped, but can’t priority be given to tax payers visiting government offices; can’t a few berths or seats be kept aside for them on the railways or in buses? Can’t separate queues be instituted for taxpayers during airport security checks or immigration? In today’s times, even small gestures of recognition will go a long way in alleviating tax payer trauma.
(The writer is former Executive Director and Member, Board of Directors, BEML)