SUPREME COURT VERSES THE STATE?
Given below is an interesting article I found while reading the daily “Indian Express” on Saturday 09-July-2011. The article reveals the astonishing fact that the Middle Class (working class) is a source of “Black Money”.
In the Supreme Court’s recent black-money order, the case against the state is made as follows. First, by following “neo-liberal” policies, the state has destroyed governance. “The paradigm of governance that has emerged, over the past three decades, prioritises the market, and its natural course, over any degree of control of it by the state.”
Second, that this lack of governance has encouraged both the generation of black money and its transfer to tax havens abroad. “The issue of unaccounted monies held by nationals, and other legal entities, in foreign banks, is of primordial importance to the welfare of the citizens. The quantum of such monies may be rough indicators of the weakness of the state, in terms of both crime prevention, and also of tax collection. Depending on the volume of such monies, and the number of incidents through which such monies are generated and secreted away, it may very well reveal the degree of ‘softness of the state’.”
Third, that not collecting “the large quanta of monies stashed abroad would also indicate a substantial weakness in the capacity of the state in collection of taxes on incomes generated by individuals and other legal entities within the country.”
Fourth, that this black money prevents the government from serving the aam admi: “In addition, such large amounts of unaccounted monies would also lead to a natural suspicion that they have been transferred out of the country in order to evade payment of taxes, thereby depleting the capacity of the nation to undertake many tasks that are in public interest.”
Fifth, that this generation of black money is not only anti-national, but threatens the security of the state. “The worries of this court are also with regard to the nature of activities that such monies may engender, both in terms of the concentration of economic power, and also the fact that such monies may be transferred to groups and individuals who may use them for unlawful activities that are extremely dangerous to the nation, including actions against the state.”
Sixth, and finally, that given these circumstances and tragic reality, the court has to step into a domain not necessarily its own. By doing so, the court is rendering an important service to the nation — stopping the flow of black money, recovering it, and thereby engendering a new order: “The resources of this court are scarce, and it is over-burdened with the task of rendering justice in well over a lakh of cases every year. Nevertheless, this court is bound to uphold the Constitution, and its own burdens, excessive as they already are, cannot become an excuse for it to not perform that task. In a country where most of its people are uneducated and illiterate, suffering from hunger and squalor, the retraction of the monitoring of these matters by this court would be unconscionable.” (All quotes are from the order.)
Black money comes via tax evasion; while tax evasion is illegal, sometimes it can be in response to bad laws. When Indira Gandhi instituted a 97 per cent marginal tax rate, practically every bureaucrat who implemented the law was creating black money. That was then; as also was the sad reality when the Supreme Court, in effect, rubber-stamped the imposition of the Emergency.
How valid is the Supreme Court’s black-money case against the government? Not very. First, the size of income-tax evasion is relatively small, and much smaller than the Supreme Court’s contention of astronomical sums. In 2010-11, total income tax payment, if every individual was fully compliant, and paid all the taxes owed, would have been close to Rs 332,000 crore. Actual tax collected was around Rs 150,000 crore and so black income was around Rs 184,000 crore, or about 2.5 per cent of India’s GDP. Not a small amount, $40 billion, but not astronomical.
Most interesting is the distribution of this black money — who generates it? Not surprisingly, the group with the largest aggregate income: the aam admi. The poorest income tax group, Rs 2-5 lakh, accounts for close to 80 per cent of all taxpayers, and close to 63 per cent of all taxable income. It is also the group with a large proportion of self-employed individuals. And also the group with the lowest tax compliance rate — around 36 per cent, or slightly more than one-third of those eligible to pay taxes in this group, actually pay taxes. This group does not come under the TDS automatic-payment system; it comprises of lawyers, doctors, and shopkeepers.
The richest group, the one I infer that the Supreme Court thinks is not paying taxes and sending this money overseas, actually has the highest compliance rate: around 60 per cent. Black income generated in this group? About Rs 37,000 crore in 2010, or only $8 billion annually. Astronomical? By no stretch of the imagination. Even the total amount of income-tax evasion black money generated each year in neo-liberal India is not astronomical.
Well-meaning people often confuse the low level of the population paying taxes with black money. The reason for the former is that India is not a rich country; one has to be in the top 20 per cent of the working non-agriculture economy to be eligible to pay direct taxes. And about 40 per cent of Indians pay taxes, and most of the non-compliant are the not-so-rich middle-income people. The aam admi is the number-one culprit in generating black income, but it is a bit unseemly to make a federal case of this reality.
Case dismissed.
(The writer is chairman of Oxus Investments, an emerging market advisory and fund management firm)
NO NEED TO FILE INCOME TAX RETURN IF…..
The Central Board of Direct Taxes has notified the scheme exempting salaried taxpayers with total income up to Rs.5 lakh from filing income tax return for assessment year 2011-12, which will be due on July 31, 2011. [Circular No.402/92/2006-MC (14 of 2011)]
Individuals having total income up to Rs.5,00,000 for FY 2010-11, after allowable
deductions, consisting of salary from a single employer and interest income from deposits in a saving bank account up to Rs.10,000 are not required to file their income tax return. Such individuals must report their Permanent Account Number (PAN) and the entire income from bank interest to their employer, pay the entire tax by way of deduction of tax at source, and obtain a certificate of tax deduction in Form No.16.
Persons receiving salary from more than one employer, having income from sources other than salary and interest income from a savings bank account, or having refund claims shall not be covered under the scheme.
The scheme shall also not be applicable in cases wherein notices are issued for filing the income tax return under section 142(1) or section 148 or section 153A or section 153C of the Income Tax Act 1961.
IGNORANCE OF LAW IS NOT AN EXCUSE -I
Article is written in email format
Dear ITR ians
This email is applicable (relevant) only for people who had filed their tax returns (ITR) for 2009 & 2010. Others can ignore this
Many of you have heard of this saying “Ignorance of law is not an excuse”.
Above saying is also applicable to Income Tax Act & filing of tax return. Many times a tax payer makes many mistakes while filing his tax return. Namely:
1. Claimed 80C deduction more/less than actual investment
2. Interest income from FD is not disclosed
3. Not accounting 2nd Form 16 when there is change in job
4. Not disclosed Short term capital gain from shares
5. Not corrected errors in Form 16 (you need to calculate tax correctly even though form 16 has wrong calculation – (Sec 240A – Self Assessment)
6. Not disclosed Rental income
7. PF/Gratuity withdrawal (These have some exemptions too)
8. Wrong claim of benefits of Section 54 when sale of house property.
9. Wrong or No Claim of HRA
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This post have authored by CA. Chikkerur CR. The author is a Praticsing Chartered Accountant. CA. Chikkerur CR, B com, ACA, MBA DISA and recently completed LLB in 2010. He had 5 years of rich experience in one of the Big 4 firms in the service industry before starting his own CA FIRM in BANGALORE. E Mail : chidu_11@yahoo.com|, Website: http://www.chikkerur.co.in
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Few of above mistakes will increase tax liability of the assessee & few of them will decrease the tax liability (it may result in tax refunds/benefits to the assessee).The tax payer usually misses above points may be because 1) He is not so serious or in hurry to file his return 2) He will not disclose above details with his CAs/ Tax experts while filing tax return 3) Tax payer may not knowing these points while filing return & he would be under impression that he can avoid tax.
But following may be the consequences of not disclosing:
1. He may get notice from IT dept to make payment of extra tax with Interest (234A, B & C)
Eg: If your tax liability is Rs. 20,000 arrived because of not disclosing all incomes or claiming wrong or more deductions as above discussed
2. Concealment of Income Section 271(c) – ITO has even power to levy penalty of 300% of Tax liability other than above interest. But this provision is being used rarely.
3. Failure to comply with any order from the IT department- This may result in penalty of Rs. 10,000 if you ignore replying notices or orders of ITO
4. Your case may be selected for scrutiny.
In the next part we will discuss about how to file revised return in order to avoid legal consequences.
DUE DATE OF FILING INCOME TAX RETURNS FOR A.Y. 2010-11 EXTENDED UP TO 15 OCT. 2010
F.No. 225/72/2010-ITA.II
Government of India
Ministry of Finance
Department of Revenue
Central Board of Direct Taxes
Dated : September 27, 2010
Order under Section 119 of the Income Tax Act, 1961
On consideration of the reports of disturbance of general life caused due to floods and heavy rains, the Central Board of Direct Taxes, in exercise of powers conferred under section 119 of the Income Tax Act, 1961, hereby extends the due date of filing of returns of income for the Assessment Year 2010-11 from 30.09.2010 to 15th October 2010. Accordingly the due date for Tax Audit report u/s. 44AB of the Income Tax Act is also extended to 15th October, 2010.
(Ajay Goyal)
Director (ITA. II)