The Hindu Business Line : I-T with a human face

The income-tax law is a nightmare as much for tax-evaders as it is for honest taxpayers. In the event, it is demonised by both. While it should remain a demon for tax-evaders, it should acquire a human face for honest taxpayers. One hopes the new government, which is avowedly aam aadmi-centric, would reach out to the common man and address his concerns hitherto not done.

Mouths fed

As it is, a carefree bachelor is treated on a par with a care-worn family man. While this may be justified on democratic and simplicity grounds, there is something gnawingly iniquitous about it. Consider a salaried man with a taxable income of Rs 10 lakh on whose income as many as ten persons are dependent and a yuppie with the same income but without a care in the world.

The two ought to be treated differently. Many countries do this by giving personal allowance which increases as a multiple of the number of mouths to be fed. Votaries of small family norm may decry this dispensation in limine. But a large family might also be a joint family with no family property but only with a lion-hearted and generous person to lean on or look forward to.

The income-tax law that is generous to one’s social consciousness ought to be considerate to the one who discharges his filial responsibilities. To be sure, such a dispensation would strain the resources of the administration and might defy verification of genuineness of claims as to the size of one’s family.

But with social security number or other unique identification of every citizen of the country that is linked to one’s permanent account number, it should be possible to overcome the problem of implementation and enforcement.

Youth and the aging

Senior citizens do get a preferential treatment by way of a heightened initial exemption amount. While this goes some way in addressing the concerns of our senior citizens, the concerns of youth must be addressed as well. The propensity to save is inversely related to one’s age — a youngster needs to save more and build capital.

He must therefore be given that much more elbow room to save and be rewarded by the tax law. As it is, the income-tax law treats everyone alike. Section 80C puts this admittedly sensitive issue into a straightjacket — everyone is entitled uniformly to a maximum of Rs 1 lakh by way of tax-related savings.

While Rs 1 lakh must be the bare minimum, it must increase with decrease in age of the taxpayer.

Those in the 18-25 age bracket, should get Rs 1 lakh more on this account, those in the 26-35 age bracket should get a lesser additional entitlement of Rs 75,000, those in the 36-45 age group should get a still lesser additional entitlement of Rs 50,000 with those in the 46-55 bracket getting only an additional Rs 25,000 entitlement.

Beyond 55 years of age, one loses the urge to save for obvious reasons and instead starts looking to a contended retired life. They would have to make do with the bare minimum Rs 1 lakh. Such a discriminatory tax-related savings regime would incidentally build the much needed capital for the nation as well.

As it is, retirement age and the status of senior citizen entitling one to preferential tax treatment do not coincide. In all fairness they must.

The retirement age of 60 for government employees should be taken as the standard for conferring the hallowed status of senior citizen. It is unfair to tax a pensioner stiffly during the period of wilderness — when his income is depleted and he is unfortunately not yet 65.

Education loans

Section 80E gives tax benefit only for interest paid on education loans taken for higher studies. There is no earthy reason why the principal should go abegging. If tuition fee paid from out of one’s income can qualify for tax benefit under Section 80C, in all fairness tuition fee paid out of education loan too should.

Therefore, Section 80E should be amended to grant tax relief both to principal and interest of education loans. That the tuition fee paid from out of loan gets tax benefit only when the loan is repaid is a penalty enough for not paying tuition fee from out of current income.

(The author is a Delhi-based chartered accountant.)

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