How Removal of Income Tax can Take Indian Economy to USD 50 TLN in coming 20 years or less time?

 23^rd November 2021

How Removal of Income Tax can Take Indian Economy to USD 50 TLN in coming 20 years or less time?

Dear Fellow Travelers,

Namaste! Our post on applying VED VYAS on investing was the most useful post for personal growth. But MODI JI’s farm law post created more excitement in readers. I often try to test the attention of the masses with the posts. Very few people are seriously interested in their persona growth. It seems they have a lot of faith in LUCK.

How Income Tax was introduced?

Income Tax was first introduced in the World in 1860 in India by British Government. The USA did in 1861. You will be surprised to know that 97% was the TAX Rate in India at that time. If you check the history of various countries introducing income tax – the major reason was to finance WAR-related expenses. It started with temporary measures and ended up being permanent.

What are India’s Income Tax Statistics?

As per Budget 21-22, the government is expecting 12 paise for every rupee from Income Tax. It means Income tax forms 12% of the government revenue. This ratio has been in the range of 8-12% for a long period. For our discussion – let us assume it is 10% on an average for a long time.

The Cost of Income Tax to the country: -

1.   Administration cost of running the Income Tax department.

 

I could not find out the actual cost but there is a cost for running such a big department in a country like India. Indirect tax collection cost as per Google is 1% approx. So, if we assume the same for Income tax then we are spending 1 paise on this. So, our effective receipt is 9 paise from every rupee.

This is government cost. All individuals who are filing returns also have to incur costs on CA fees and other expenses.

Normal people pass through tension when they get any IT notices and they run pillar to post.

 

2.   The growth of SWISS BANK and PANAMA kind of issues: -

 

Assume the plight of a person who is earning Rs.5 Cr to Rs.5000 Cr per annum. He is likely to pay 40% or more. He has a natural dislike to pay this kind of tax. He will find out ways and means to reduce his tax outgo and transfer his money to TAX HEAVENS. He can afford the fees of the FOREIGN Agencies as his amount is quite big.

 

If we make India an Income TAXFREE country – these monies can come back and can be utilised for India’s growth.

 

Modi Ji was talking about Rs.15 lakh per Citizen of BLACK MONEY in Swiss Bank. This money has gone out due to Income Tax evasion only. Had there been NO TAX – there would not have been any incentives for a big income earner to transfer money outside India.

 

If I just do the plain calculation for 100 Cr citizen and Rs.15 lakh per citizen the amount is Rs.1500,000,000,000,000. You can figure out this amount in some Crs or Billions as per your understanding.

 

3.   Growth of Western Economies: -

When we were under British Rule – they were outsiders and they had all incentive to take out money from India and make their country rich.

After independence – the money is still going to the western side in one way or the other way to evade the tax. So, from 1947 till today we are major contributors to the Western Countries' growth.

4.   Young Talents: -

I am dealing with NRIs since 1996. The usual reason for their settlement abroad is PEACE of MIND with respect to GOVERNMENT harassment from Income tax and other compliance issues. Today young people are shifting to CANADA or NEW ZELAND in a big way. They are TAXED there also. But they don’t have any Governmental hassles. If the Income TAX is removed – these people can have peace of mind and incentive to come back to India or not to go from India- those who are planning to shift.

5.   Exodus of Business People: -

 

As per Online resources, 15000 billionaires and Industrialists have taken CITIZENSHIP of other countries since 2018. They are doing this to save TAXES and enjoy their money. If Income tax is removed – why they will waste their money in taking citizenship of the other country? They will stay in India and expand their business.

 

6.   Attracting other countries money: -

 

The way other TAX HEAVENS are taking our money, we can attract tons of money from other countries where there is higher taxation. The USA is planning to tax billionaires. They can come to India – if we remove the income tax and assure them that we will not go back on this.

 

7.   Beneficial to SMALL TAXPAYERS: -

We have 15% tax for income of Rs.10 lakhs. So, a small guy is paying Rs.1.5 lakh of income tax. Bank FD rates are 5% now. FD is the most preferred investment vehicle for normal Indians. Say he has Rs.1 lakh to save after TAX and his expenses. He is getting Rs.5000 from Interest. If he has not paid the TAX – he can earn Rs.12500/- on his FD of Rs.2.5 lakh. This will give more money to banks at lesser rates to lend to businessmen and industrialists.

The other advantage is the middle-class fellow will not feel the pinch of lower interest rates.

8.   BENAMI PROPERTY and BENAMI INCOME: -

 

The government is planning to link property to ADHAAR CARD and PAN CARD and make sure there are no BENAMI assets or income are hidden.

All these wastes of money and time are done because we have an income tax. If we remove this – Why the big guys will take property and income in others’ names?

A lot of HASSLES can be removed.

9.   Cash hoarding can come to banking channel: -

 

Modi Ji’s experiment with Demonetisation to remove the black money from the economy failed in 2016. If the income tax was removed – there will not be any incentive to keep cash or transact in the cash.

 

This money will come to the main channel and interest rates will come down further. The banking system will become more robust. This will give the government and the business people much-needed capital at a lower rate and in abundance.

 

10.                Government Statistics on TAX Income: -

As per the Budget – 53 paise is coming from indirect and direct tax revenue from every rupee. If we deduct 10 paise of income tax from this – the government is still getting 43 paise. 40% tax is a huge amount. They can find out some other way to tax indirectly and make the loss of 10 paise good.

Thanks to laws and their subjective interpretations – the countries precious resources are wasted in Income Tax related litigation.

11.                Anomaly with the investors: -

 

By definition, Share Holders are the owners of the company. Now, if the company distributed the profit after paying the tax – why the individual person should be taxed on Dividend income. A dividend is nothing but a portion of the profit shared by the company to its owners.

HNI’s who are in the 40% slab – finds this is too much taxation for them as this dividend is added to their income.

What is India’s History?

Chanakya was the first to go for ZERO income tax in his time. All people were rich in his time and India was known as SONE KI CHIDIA. His model was followed by a couple of kings after him and they all prospered. Study the way of working in the olden times and you will find this to be true.

What NEXT?

Our ministers are going abroad for FDI and other investments. Remove income tax and see they will be a line of FDI and Portfolio Investors in India. All our deficits and money problems will go instantly.

This is a very detailed subject and 200 pages will not be enough. The above post is written to give you a very brief perspective about how India can remove the obstacles to growth. Nobody can stop India from becoming a USD 50 TRILLION economies. This can be our strategy to take on CHINA and the USA.

I welcome your comments on the above post.

Have a great time.

 

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Live With Passion…Invest With Passion.

Hitesh Parikh.