It’s hurting the best taxpayers
For the salaried and the middle class, the budget and economic policies being pursued by the government don’t seem to help much. There are about three crore tax payers. Half of these pay and file taxes only for the tag of being an income tax payer. That leaves about 1.5 crore of genuine tax payers and the bulk of them constitutes the salaried class. Many a corporate entity file returns for claiming deductions and concessions.
As per figures, only 42,800 people have a declared income of over the Rs 1 crore limit; and only 1 per cent of the population accounts for 12.6 per cent of Gross National Income or GNI (as per the Economic Survey 2016). What happens to the rest? Nobody pays taxes on time except the salaried class. The focus of the government should be on increasing the tax base. The government, instead of pampering and treating this salaried class as a holy cow, is killing the goose which is laying the golden egg.
Out of the total tax collections of Rs 14.4. lakh crore, it being the target for revenue collections, indirect taxes account for 44.5 per cent and direct taxes account for 55.5 per cent. Out of the 55.5 per cent of the direct taxes, 41 per cent accounts for personal taxation and 59 per cent accounts for corporate income tax. In effect, out of the Rs 14.4 lakh crore, about Rs 3.28 crore is collected by way of personal taxation with the major contribution being from the salaried class. What do the bulk of these salaried tax payers get for paying regularly and contributing to 22.7 per cent of the total tax? No tax breaks, no major concessions or deductions and, on the other hand, a double whammy in the form of Krishi Kalyan cess which will increase the cost of everything from A to Z.
Most of the concessions given to the salaried and middle class are more cosmetic and have no impact on the net savings. In fact, the rising costs on every front hardly leave any money for saving. With the fall in the interest rates on savings and other deposits, there is no incentive for saving.
The budget had a proposal in the form of imposing tax at the time of withdrawal on 60 per cent of the contributions made after 1 April, 2016, to EPF and other schemes. This proposal had taken the salaried class by a storm.
Fortunately, better sense prevailed. The budget has not increased the slab rates which the salaried class was looking forward to. It has given concessions for acquisitions of new houses for first-time buyers, but with the conditions and limits imposed, one is better off in not availing the benefits.
In conclusion, one can say that the budget and the policies have no positive impact on the salaried and middle class.
Srinivas Ayyadevara - The writer is a Chartered Accountant and
former President of FAPCCI
It hurts a bit but helps a lot
A common middle class citizen going about his day’s job to fend for his family and save some money for his future obligations and retirement might neither have the interest nor the intent to understand the current macro-economic global climate. Hence he might not see any merit in the present government’s actions to further tax his earnings through surcharges and other levies, or reduce his earnings on the interest from his savings.
However, if the government does not act decisively in areas of key economic legislation and macro-economic policy, the first to be affected will be the common man. In the West, the common man took the worst hit in the face of a serious economic crisis. Their hard-earned life savings have evaporated, and their homes, properties and assets have become worthless. Their jobs vanished. So did their regular earnings for their immediate survival.
The first rule of an enduring macro-economic policy is that it cannot be rigid and static. It has to be evolving, agile and dynamic. Indian economic policy cannot be stuck to the mindsets of the 80’s & 90s.
The world economy is into a massive churn. It is imperative that we stay agile and customise our policies to in ways as to help the nation emerge from this situation with more strength. That’s why the government increased the momentum on policy reforms. This has resulted in an envious growth rate.
If the Opposition parties are crying foul over falling oil prices not impacting the citizens directly by way of a fall in domestic oil prices, they must do a clear rethink with a sense of nationalism and macro-economic prudence.
There is no guarantee yet that the global oil prices will keep falling. Direct price transfer is neither possible nor being practised anywhere else.
Nevertheless, it benefited the citizens directly, through a huge drop in the everyday consumable prices. The CPI -led inflation has come down from 9 per cent to 5.4 per cent.
Interest on savings in India is the highest in the world. One cannot expect lowest interests on loans and high interests on savings. As we are not an island and are connected economically to the world, banks will burn with high interest rate payouts.
The recent percentage rate cut is way too minimal to even cause a worry. Just to draw a comparison, interest on savings in Indian banks is at an average of 5 per cent while in the US it’s 0.5 per cent, and in the UK it is 0.8 per cent.
The Indian government still promotes savings and rewards those who save.
We must support the government’s decisive reform agenda to safeguard our economy from global threats and drive it forward.
Krishna Saagar Rao - The writer is a is a BJP Spokesperson and an Organizational Strategist