Budget,2013 should raise income-tax exemption limit from Rs.2,00,000 to Rs.5,00,000 and restructure various tax slabs. This would be a win-win proposition for everyone-Government, taxpayers and industry for the following reasons
(1)As per March 2012 report(49th report) of the Parliamentary Standing Committee on Finance, those with annual income upto Rs.5Lakhs constitute some 89% of taxpayers but contribute only 10% of tax revenues collected.
(2)This means high cost of collection-disproportionate effort compared to revenues collected. Clear case for raising annual threshold exemption limit from present Rs.2,00,000 to Rs.5,00,000.
(3)Those with Annual Incomes Rs.5 L to 10L are 5.6% of taxpayers and contribute to 14.8% of tax revenues-Tax slab of Rs 5L to 10L at 10%. Currently 10% tax slab is applicable for incomes of Rs 2L to Rs.5L
(4)Tax for slab 10L to 20L be 20%. Currently 20% slab is Rs.5L to Rs.10L
(5)The 30% tax rate should kick in for incomes exceeding Rs.20L. Currently incomes exceeding Rs.10L taxed at 30%
The above restructuring of tax slabs will:
(1)As per March 2012 report(49th report) of the Parliamentary Standing Committee on Finance, those with annual income upto Rs.5Lakhs constitute some 89% of taxpayers but contribute only 10% of tax revenues collected.
(2)This means high cost of collection-disproportionate effort compared to revenues collected. Clear case for raising annual threshold exemption limit from present Rs.2,00,000 to Rs.5,00,000.
(3)Those with Annual Incomes Rs.5 L to 10L are 5.6% of taxpayers and contribute to 14.8% of tax revenues-Tax slab of Rs 5L to 10L at 10%. Currently 10% tax slab is applicable for incomes of Rs 2L to Rs.5L
(4)Tax for slab 10L to 20L be 20%. Currently 20% slab is Rs.5L to Rs.10L
(5)The 30% tax rate should kick in for incomes exceeding Rs.20L. Currently incomes exceeding Rs.10L taxed at 30%
The above restructuring of tax slabs will:
- incentivise hardwork and enterprise
- incentivise more investments
- increase voluntary compliance
- reduce evasion and avoidance
- reduce cost of collection and administrative work for Government
