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A succinct and riveting story about ‘Taxation’

There is no doubt that today ‘Tax’ is the buzzword. It is aptly said by an American scholar that
‘the democracy will cease to exist when you take away from those who are willing to work and
give to those who would not’. So in a country like India, there has to be a crucial balance
between rights of the Citizens vis-à-vis the responsibility of its Government to devise policies
and plans regarding Taxation.

The word ‘Tax’ comes from a Latin word ‘Taxo’, which means ‘estimate’. A tax is a compulsory
fee or financial charge levied by a government on an individual or an organisation to raise
revenue for public works. It is ‘Income Tax’ which impacts the pockets of the common salaried
class the most.

Have you ever imagined when the first ever income tax was levied in the history of Indian
Taxation? The history of Income-Tax in modern India dates back to 1860 when the first Income
Tax Act was introduced by James Wilson who became (British) India’s first finance member.
This Act lapsed in 1865.

Much later, i.e. in 1922, major changes were done in the Income Tax Act. Even after
amendments there were merely 68 sections in the Act. Since then many revolutions came and
gradual changes were made in the provisions of the Income Tax Act. These amendments though
rational and just, they were not assimilable to the common man. That is why every time there
was any change, it had to face a barrage of criticism from them.

Even Albert Einstein, the profound scientist, found taxes inscrutable. He once said, “The hardest
thing in the world to understand is the Income Tax”. As a result of these constant amendments,
today the Income Tax Act, 1961 has approx. 300 Sections, which is undoubtedly the reason for
calling it as a weighty tome.

Let’s take note of an interesting trivia revolving around Taxes across the globe. There are few
countries which impose some bizarre taxes:-
Switzerland – where tax is levied on Pet dogs

Ireland – where tax is imposed on the methane gas coming out from the fart of cow

Arizona U.S – where tax is levied on purchase of ice blocks

Even India because of varying culture and influences, in it’s various States including Punjab,
Chandigarh and Rajasthan, imposed cow welfare cess. Very recently in Madhya Pradesh, state
administration has made it mandatory for those applying for arms licence to donate 10 blankets
to cows or serve for three days in a ‘gaushala’ (cow shelter).

Coming to complex tax structure and frequent amendments in the provisions of the Act, which
has someway caused mental pressure to the common citizens as they have to face undue
harassment from certain dishonest taxmen during their assessment proceedings. Thus, it is the
high time when the department must have taken it seriously to change their image in the eyes of
the honest taxpayer of the country.

If we talk about of future of Income Tax in India, first thing which comes to mind is the recent
Taxation Laws (Amendment) Bill, 2019, which proposes lower rate of taxation for the new
domestic manufacturing companies with an option to pay tax @ 15%, which were established
after October 1, 2019 and started operations before March 31, 2023. The companies opting for
lower tax rates will, however, not be entitled to claim any rebate or deductions.

E-assessments through faceless mode, which has already been started for large tax payers as a
pilot project is also paving the way forward for smooth inculcation of technology for
simplification of procedural aspects of taxation.

Also as per the Income tax department’s project “Insight”, watch of social media uploads of
vacation, purchase details of heavy price items, costly tickets of concerts acts as a catalysts to do
evaluation of escaped income.

Many countries across the globe like Japan, Philippines, South Korea give various incentives to
their compliant taxpayers. Even Pakistan has a scheme to reward the top 100 taxpayers every
year with access to VIP lounges at airports, fast-track clearance at immigration counters, free
passports and enhanced baggage allowance.

Indian Government has also initiated a practise to distribute Bronze, Silver and Gold Category
Certificates to various compliant taxpayers which CBDT terms as the first effort by the
government to directly communicate to the tax payer as appreciation for their contribution.
Given the negative image of the Income Tax Department caused due to generation of tax demand
notices and rigorous assessment proceedings every year, a positive communication, was much
needed. Any future scheme of the department to cut down on disputes and litigation on taxation,
and to acknowledge / reward tax payers will be a welcome move and this is what the theme of
the TIOL Annual National Taxation Awards – to reward the tax paying behaviour of a common
man.

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