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  • Category: Miscellaneous

    Should Direct Tax or Income Tax Act be abolished?

    The Income Tax Act should be abolished. Direct taxes should no longer be imposed. Discuss the pros and cons of these suggestions.

    There has been a lot of debate and suggestions from various quarters that since GST has been implemented and Government is mopping up a lot of revenue, so the Direct Tax i.e. Income Tax Act should be abolished.

    Many are proposing 'One Nation One Tax' theory, but I would like to put out some figures and let the members decide as what should be done and those asking for abolishing the Iccome Tax Act should reconsider their thoughts based on facts.

    As per the annual data published by the Income Tax Department for the FY 2018-19, which I had read I am putting out some figures here:
    Total tax comprises of Direct Tax and Indirect Tax collection. (Income Tax + GST)

    Percentage of direct tax contribution to total tax is 54.78% for the Financial Year 2018-19. It has been over 50% since Financial Year 2007-08.

    The direct taxpayers include individuals as well as companies and other persons. I will discuss about individuals only.

    We are a country of roughly 130 crore people and out of which only 8,04,45,511 are taxpayers.
    Out of the 8 crores, only 5,95,44,767 individuals file return. Now if we do simple calculation we can see that only 6.15% of people are taxpayers and only 4.16% are tax return filers.

    Now, if such a small percentage of people are making a contribution of over 50% to the total tax, then imagine the tax collection and contribution that can be made if the number of tax payers increase. Even a single percent increase will make a huge difference to the exchequer of the Central Government.

    This tax is collected by Central Government only and State Government tax data is not here. State Government also collects a lot of local taxes which doesn't go to the Central Government.

    What do members have to say about abolishing Direct Tax or Income Tax Act? Will it be a good thing to do or a disaster?
  • #710462
    I don't think it will not be a disaster. As per the statistics given by you out of 135 crore population only 3 crores are paying tax and 5 crore people are filing the returns. Is it that all other people's income is less than the minimum taxable limit? No many are not paying by making some mathematical gimmicks. Indian people are very intelligent and they know how to avoid tax.
    There are many rich people who never bother about paying tax. Only employees will pay tax on every paise they earned.
    Once the income tax is abolished, the question of black money will not arise. All purchases should be taxed and a mechanism should be worked out so that the tax collection will become automatic. Many times the sellers will not give any receipt and hence they need not pay tax. If the government can control this, the tax collection on purchases will grow and the government need not worry about the resources.

    always confident

  • #710467
    Abolishing direct taxes and income tax as suggested by the author does not augur well as most of the big projects and central funding to the states are through the direct and income taxes. It is like asking people to work without the salaries. The government has much expenses to incur in the form of infrastructure developments, paying pensions to the pensioner, maintaining railways and its expenses,, and keeping a aside for the national disaster management, and above all India has the commitment to help small nations around us through various schemes and all these are possible through our taxes paid to the government. But there is always possible to expand the tax payers persons and if many are included even the tax percentage now charged can also be reduced. However in no case the taxes could be abolished by any govt in future.
    K Mohan @ Moga
    'Idhuvum Kadandhu Pogum "
    Even this challenging situation would ease

  • #710499
    Income tax is on the income of the people and many self employed people do not disclose their income fully and escape the tax net. So, whatever Govt may try it is very difficult to increase the income tax net and only the obvious earners would give it. So, one thing which Govt should do is that people who have money, only they go to market and buy goods, only they order things from online store, only they go to big hotels, and only they have luxuries of all kinds. So just keep the basic amenities aside like basic food items, milk and vegetables etc and increase GST on all the luxury items significantly. There is no need of any tax to be levied and only GST would compensate for all the taxes. Further, any house more than 1 BHK or 500 sq. ft. Govt should increase registration and house tax significantly. Let rich only give taxes and poor be left out with basic amenities. Middle class is a misleading term. There are only two classes in our country poor and not poor.
    Knowledge is power.

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