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IN his previous Budget, FM Jaitley had made a conscious effort to make personal income tax more liberal and less intimidating. This helped in direct tax collections, which jumped 18 per cent by December 2017. Apparently it did pay handsome dividends to halve the tax rate for the lowest income slab of Rs 2.5-5 lakh to 5 per cent and promise no scrutiny to first-time filers. Jaitley’s assurance of making taxation rates “more reasonable” and the tax administration “more fair” helped in expanding the tax base. Trusting the Finance Minister, people, particularly youth between 18 and 30, voluntarily entered into the tax net. The younger generation is getting their PAN cards made because most of them want to become honest citizens. If not all, most people are virtuous, but they are compelled to stray because of complex rules, excessive rates and corrupt taxmen.
It is expected that the FM will stay on course even in the next Budget by further reducing tax rates, particularly for the lower income slabs, besides making the regime simpler. The tax authorities are now equipped with about 35 crore PAN cards duly linked with bank accounts of the respective cardholders along with mobile numbers. A third of them have already linked their Aadhaar numbers with their PAN cards. This is the time when the government must reward the most honest group of taxpayers — the salaried class. People having only salaried income should be exempted from filing income tax returns. This will not only send a positive signal, but also reduce the taxman’s administrative burden.
The Arbind Modi taskforce has been constituted to revamp the direct tax regime. Its report is expected in May. FM Jaitley, however, has no time to wait for the report. He needs to show the path to the bureaucrat-driven taskforce as the natural approach of civil servants is to be circumspect and status quoits in their approach. Simplicity will expand the tax base, increase the revenue and help in reducing the GST rates that has a direct bearing on the poor.
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