Instead of taxing, make it mandatory to invest in long term bonds for social and physical infrastructure. This will include govt. bonds, municipal bonds, long term infra bonds and long term (5 yr +) deposits etc. When people will invest in municipal bonds, they will be able to see how that fund is utilized and will have an ownership feeling.
Annual income (Rs.)
|
Tax rates
|
Exemption detail
|
Target
|
Upto 3
lakh
|
No tax
|
Low
income population
|
|
3-10
lakh
|
10%
|
Exemption
on investment in insurance and long term bonds upto Rs 2 lakh
The tax seems to be less but we will remove all other exemptions like LTA HRA etc and overall process will be greatly simplified
|
Most of service class population
Purpose is to simpify tax process for 5-10 lakh Rs income group |
10-20
lakh
|
15%
|
-minimum 10% of income above 10 lakh to be invested mandatorily
-More
exemption on upto 30% of income above 10 lakh, that is upto 3 lakh) for long term investment
-5% surcharge on tax on income above 10 lakh |
Middle
class with white color jobs, professionals
(Removing HRA and home loan exemption would balance the lower rate of tax. This will help reduce interest rates and inflation in real state sector) |
| Now focus on rich who does not pay tax. its better to make certain part of income to be mandatorily invested instead of taxed |
special tax saving bonds with moderate return should be made for them
|
||
20-50
lakh
|
20%
|
-minimum 10% of income above 20 lakh to be invested mandatorily (in addition to mandatory investment of 1 lakh in previous slab)
-exemption on upto 30% of income above 20 lakh(that is upto 9 lakh max) on long term investment (in addition to 3 lakh exemption of previous slab)
-10% surcharge on tax on income above 20 lakh |
high income professionals
(encourage investment and avoid tax evasion) |
50 lakh
to 2 cr |
25%
|
-minimum 10% of income above 50 lakh to be mandatorily invested (in addition to 4 lakh)
-more exemption upto 30%
above 50 lakh
-10% surcharge on tax on income above 50 lakh |
small businessmen who do everything to avoid taxes, investment in capital infrastructure can be exempted
|
2 crore
and above |
30%
|
-minimum 10% of income above 2 cr to be invested (in addition to 19 lakh)
-up to
30% of income above 2 cr can be invested in long term bonds without tax
-more rebate can be given on special bonds above 1cr value for tax saving purpose only that may have low returns (say 5%) |
Instead
of 30% tax, make 30% investment. even if rerun is low, tax saving itself is 30%.
|
With lower tax rates some simplification should also be done to balance that. All exemptions on HRA, LTA etc should be removed and only insurance (health and general), PF and pension fund should be exempted. HRA contribute to higher rent and ultimately the landlord or the home loan giving bank get what the govt. should have got. Exemption on Home loan should also be removed as it also contribute to high home prices and high interest rates which makes real estate even more costlier and contribute in making a bubble in this sector. Simplified calculation would help easier assessment and greater compliance.
4. the black money would be redirected to white economy and bubble of real estate will also come deflate as black money has a huge role in high real estate prices.
5. A municipal/panchayat level fund mgmt body can be created to utilise this fund in local area and infra dev like hospital, road , transport, water mgmt etc. This will provide better infrastructure investment in local area governance.
We need to have a change of mindset about how we tax our citizen and how much value we provide to them from the tax they give to the government.