First of all there should be a better understanding of the word "TAX" to the law makers, law enforcers and also to the common people who are paying the tax. Some people may ask why should we pay tax. Yes, that is a valid question. But this is not an unanswerable question. The simple answer to this can be given by taking a simple example. We throw garbage in the dustbin everyday and a municipal van comes and collects it and dumps it in a place outside the city. We are not paying anything for this. Where did the money come from to hire those people, buy those vehicles and collecting the dumping yard, and to recycle the waste. All this money is coming from our taxes. We are paying the taxes and we are getting the services from the government in some form or the other. This is why we need to pay the taxes. Likewise there are many situations, in which we are not paying money for them. This can be compared to going to a coffee shop and having coffee and paying the bill. There we are paying for the product and service we get from the coffee vendor. The same can be applied to taxes also. Yes, there is an ill treatment in the tax valuation. There is a burden on the middle class person who is earning, saving less for his future and paying more to the government. Here the highly-earning people will not have a problem. Yes, you may ask why they don't have any problem? Let me explain. Compare a person who is earning 3 lacks per annum and a person who is earning 10 lacks per annum. Lets assume that both the families consist of 3 people. Now we will compare the expenses.
Nature of expense 3 lacks person 10 lacks person Rent 12*4000=48000 12*8000=96000 Traveling Expense 12*1500=18000 12*3000=36000 Household expense 12*3500=42000 12*3500=42000 8000 Medical 12*500=6000 12*500=6000 School Fees 12*1000=12000 12*1000=12000 Miscellaneous 12*3000=36000 12*5000=60000 Total 162000 260000
These are the expenses that they bear throughout the year. The expenses does not vary more than a lack rupees. According to the present tax scheme, the 3 lacks earning person will have to save some one lack rupees for him to rescue from the tax meanwhile saving less in his account. But in the case of 10 lacks earning person can save more or invest more in some property or something else to rescue his income from being taxed. And still he will be remained with much more bank balance than the 3 lacks earning person. There is absolutely no problem with this. But the problem lies in the tax free slabs and the tax free schemes. If the tax free income slab is increased some 20-30% percent of the people will go off the taxable income slab and they can save more which in turn will help the government in several ways. Again a question comes as %u201CThe government is losing the tax from them. Isn%u2019t it?%u201D Absolutely not. This is because, people will save the money in their bank accounts which in turn will be invested by the banks in form of loans or something else and the income of the banks will go up which in turn will make the banks pay more tax which is much more higher than the tax payable by the person who saved the money. If he saves the money in some government schemes such as NSC, PPF etc, the government will invest this money in FDI or FII and will get more returns. This is one reason why the government won%u2019t loose the tax. And one more is that saving the money by those people will enable them buy some vehicles or furniture or some thing else which in turn will be taxed both from the buyer and the seller. This is also one reason why the government won%u2019t loose the tax. And coming to tax saver schemes. The schemes like Mutual Funds and Shares (these are taken as an example), the schemes which will earn money to the middle people, that is the banks or investment advisors should be taken out from the tax saver schemes. This should be done because the income that is made by the investment advisors is not coming into the records and so only the schemes undertaken by the government should be used to save the tax.
Note: This is just my opinion and nothing to do with any of the policies that the government is following.
