• Investment World
• eWorld
• Catalyst
• Mentor
• Life
• Canvas
• Praxis
• Urban Pulse
• Brand Quest

S. Murlidharan

It is the taxpaying employee who is always discriminated against, says S. Murlidharan

THE salaried class has always been at the receiving end when it comes to payment of income-tax.

And over the years, the taxman has been dipping into his coffers with singular nonchalance. A chartered accountant in employment getting a salary of, say, Rs 10 lakh has to pay tax through his nose whereas a wily CA in practice with the same income by way of professional fees might well thumb his nose at the taxman.

There is considerable leeway available to a businessman to fashion his tax affairs. And this leeway is not available to his service counterpart.

Indeed what rankles more is the discretion available to a businessman to pay or not to pay tax. This discretion is because of the plethora of deductions for business purposes. The one less inclined to utilise all the deductions to the hilt ends up paying more than the wily one though nowhere near the figure of the salaried man.

Many wonder with injured innocence why two companies with the same turnover, and set up around the same time, should have diametrically opposite tax positions given the fact that no two similarly-paid salaried persons have a materially different tax liability — this is especially true of those in the more than Rs 5 lakh bracket for whom Section 88 tax rebate has been brutally wrenched away.

No one misses this more than the salaried man because a businessman has got other tax shelters to get under.

What rankles more for a householder is the fact that his domestic burdens, number of mouths to be fed, are none of the concerns of the taxman. But his business counterpart, weighed down by losses — real or contrived — is spared from tax liability.

It is for this reason that some countries have a scheme of presumptive taxation for businesses. There are quite a few schemes in vogue in India as well. But they have been floundering on the rocks of unimaginative implementation.

If the tax administration pulls up its socks, it can barge into retail establishments having a turnover of less than Rs 40 lakh and demand a tax on 5 per cent of the turnover.

The Supreme Court has held that a presumptive tax scheme would be constitutionally unsustainable if it does not allow the affected persons to file a regular return and be governed by the normal scheme of taxation. In other words, for those filing return presumptive tax should be treated on a par with TDS and advance tax. Be that as it may.

It has, however, been found that those who have been subjected to TDS or presumptive taxation do not tangle with the taxman because in any case they know that they have been let off lightly. In the event, the Government should get its acts together and crack its whip on the unorganised business sector, the hardest to tax segment of taxpayers.

There is another income that enjoys tremendous leeway in the matter of payment of tax — long-term capital gains. There is no reason why a person should be let off simply because he is prepared to lock up his gains in NHAI bonds and the one not endowed with similar waiting capacity should be asked to cough up tax.

Sooner the tax shelters are dismantled, the better it would be both for tax compliance and for fostering a sense of equal treatment amongst the honest taxpayers.

Full depreciation on R&D assets has spawned a veritable deluge of R& D centres across the country with nothing to show by way of tangible results except reduction in tax liability.

Article E-Mail :: Comment :: Syndication

Stories in this Section
Closing the ECB window?

Copyright © 2003, The Hindu Business Line. Republication or redissemination of the contents of this screen are expressly prohibited without the written consent of The Hindu Business Line