Sent by Mail & Registered AD Speed Post

 

 

20-10-2015

 

To

Respected Shri Hasmukhji Adhiya

Revenue Secretary,

Department of Revenue,

Ministry of Finance,

128-A/North Block,

New Delhi

 

Sub: Suggestion to abolish Income Tax and replace it with Employment tax & Business Tax

 

Respected Sir,

 

I sincerely thanks for giving me an opportunity to just share my one thought at Golden Glory Hall, Ahmedabad on 10th October.

 

My humble suggestion and some few key ideas to support the thought are as under.

 

I suggest abolishing the Income tax Act completely as the word Income tax is really pinching to the salary earning people and that it is eating up their hard core money. Current Income Tax structure is very complex and encourages the tax payer to find out the loop holes to evade tax and this is the fact which cannot be denied.

 

Chanakya’s advise that the “Tax structure must be as simple as possible which encourage the people to pay”

 

Yes indeed by abolishing it will be a big impact on the revenue of Government but I have a suggestion to increase the revenue by replacing and diverting the focus of revenue collection from the individual to the collective bodies and the suggestion is as under.

  

Introduction of Employment Tax:

·         This tax is to be collected from the employer at a fixed percentage on the total spending he claims as salary/remuneration to employee

 

Advantages/Key impacts:

·         Today only those persons who earns more than 3 lacs and above pays the income tax

·         But introducing this it will be nearly 80 % of the persons doing service in the country will be covered in the net and revenue of government will boost like anything (only left out may be the daily labours working in the farms in agriculture sector for those also can have a thought to include them too)

·         For example: A sweet shop owner at a metro city employs approx 200 to 300 employees but none of them are covered in the Income tax regime but everyone is getting benefit from government

·         Those who are running medium and large size business are showing major expenses as salary and this is really a question of authenticity

·         If Government introduce this as per this example it will be a huge benefit and bring each and every citizen of India under tax regime

·         Suggested tax structure (Government can decide after doing Economic survey)

o   Employer to pay 10% employment tax plus

o   2% of pension tax which should be linked to Aadhar card so once he retired he can get the pension by this way majority of citizens are covered

o   2% of medical tax so that he can avail the benefit of medical services

o   1% of security tax which government can spent after security

o   So in total 15% on the salary spent which is 50% reduction on the highest tax slab of income tax

·         There should be no change in Provident Fund at this moment, if consensus arise to do so then the above tax structure can be modified to accommodate it so that it is also covered in this structure

·         There are nearly (approx) 25 to 30 crore persons are doing jobs/service so all of them can be covered and they can feel proud that they are contributing to the nation building

·         There will be ample money circulation in the market as it will be huge saving for the person paying highest tax slab, by that way economy will get the boost

·         By abolishing the Income tax people will be attracted to show their correct income which will be a huge success of the government in bringing the money into circulation

·         Majority of European countries collects Employment tax (may be in different name) and their slabs are different

·         This tax to be allowed as the expenses to the employer so that he will be encouraged to pay the tax

·         Government has already opened the bank accounts of so many persons in India under Jan Dhan Yojana so the payment of salary to be made compulsory through bank only and no cash payment of salary allowed

·         All Government employees are suppose to pay tax from their salary as they are enjoying security and extra benefits till retirement so no extra burden on Government

·         A complex working of TDS will go away as it will not be required as this tax to be paid on monthly basis and again a big savings on the administration cost

·         Employer should not be allowed to deduct this tax amount from the salary of the person but only one time adjustment can be done as to avoid much additional burden to them for example:

o   Employer to be allowed to set off 25% from those who falls under 10% of Income Tax slab

o   50% from those who falls under 20% of Income Tax slab

o   & 100 % from those who falls under 30% of Income tax slab

·         By this way number of assesses will be reduced and government administration cost will also reduced like one big industry Reliance will be only one identity and approx tax payers will be 10000 plus as they employ that much people

·         This tax to be collected from all type of employers like Companies/Partnership Firms/Proprietary concerns/Trusts/HUF identity/Temples/Cooperative Societies/Banks ect. In short the definition of Employer should be “any person or legal identity who appoints the person for doing work for him or for his business establishment/charitable activities are Employer”

·         Salaries of each and every employee must be linked to Minimum Wages Act so as to avoid exploitations

·         This can help in Labour reforms

  

Now the question arise that what about the business houses and corporate:

 

Government can introduce the Business Tax to all business units and simplify it

·         All business units either company/partnership firm/individual proprietorship etc to pay 1% of turnover tax or 10 % of net income tax whichever is higher

 

Sir, in today’s world the tax structure of India is most complex and that is why all foreign companies are not ready to come forward and invest in India. By simplifying the entire tax structure there will be lots of investments and the growth of India will be multi fold.

 

I as a citizen of India tried to submit my idea to you and if you really think that this is“Out of Box thinking” please do Economic survey. Since I am not Government employee nor holding any constitutional position so my this suggestion to be considered as professional advise if Government use this in whole or in part.

 

I would be pleased to explain this in person if given a chance as I cannot narrate all the things in this written submission. I also understand that due to this there will be so many questions arise on various matters but there is a solution to every question and to certain extent I have few answers to that too.

 

Thanking you

 

 

 

Puroorava Patel

 

Residence Address:

“Valam” L-111,

Swatantrya Senani Nagar,

Nava Wadaj, Ahmedabad

Mobile No: +919825111901

Mail ID: puroopatel@yahoo.com

 

 

Copy to:

 

1)

Shri Narendra Modiji

Prime Minister of India

Office of Prime Minister,

South Block,

New Delhi

 

2)

Shri Arun Jaitleyji

Finance Minister

Office of Ministry of Finance

North Block,

New Delhi