WHY 100% TAX ON INTEREST INCOME, WHY NO INFLATION BENEFIT LIKE IN LONG TERM GAINS.
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WHY INCOME TAX ON 100% INTEREST INCOME
Income tax law levies income tax on 100% interest income , whereas this income consists of two components
( a) portion of inflation, which reduces the purchasing power of his/her savings
( b) income above the inflation level which can be termed as actual income.
Inflation is result of Government policies of spending more than income, printing currency etc
In last 2-3 decades inflation rate varied from 5-15% as per Government but actually it was much more in practice.
Interest rates in these period was 7-13.5%.
In these circumstances actual income after setting aside inflation was hardly 1-2%
Forgetting past, take latest figures interest is 7% and average inflation 4.5%, hence true income in 2.5%.
If we take into account income tax component at average 15% effective income is 7-1.05-4.5 = 1.45%, so persons retired from private sector are eating there savings every year.
To prove this I will put forward following illustration:
Suppose a person retired from Private sector received Rs20 lacs as retirement benefits and put in FD for meeting his her daily needs. ( MOST OF PERSONS RETIRED 10 YEARS AGO, HARDLY GOT 20 LACS)
His/her income will be 15 lacs in senior citizen @8% Rs 1,20,000/= + 5 lacs @7% 35000/= total 1,55,000
NOW TAKE INFLATION @4.5% IT WILL BE 90000/= HENCE HIS ACTUAL INCOME IS ONLY 65000/= BELOW POVERTY LINE.
If we calculate, we will see that person having deposits of 50 lacs will come just above poverty line. THEN WHY TAX?
MY VIEWS ARE BASED ON FACT THAT IN CASE OF LONG TERM CAPITAL GAINS TAX, BENEFIT OF INFLATION IS GIVEN
I REQUEST PERSONS WHO AGREE WITH ME TO SIGN THIS PETITION.
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