NEW DELHI: As per a source, the government is laying out an unconventional plan of rewarding the top I-T payers, encouraging them to willingly pay more if in case the government needs to mobilize more revenue.
Acknowledging their significant contribution to the nation’s growth, they would get the privilege to receive an invitation to tea with the Finance Minister Nirmala Sitharaman or the Prime Minister Narendra Modi, among other non-monetary incentives. It aims to help the income tax department in tax collection and ease the process.
In the first budget of the Modi government’s second term, this scheme could feature. Also, it indicates PM Modi’s administration’s desire to achieve a more progressive tax system. In this system, the wealthier ones would pay even more taxes.
On many occasions, PM Modi Modi has thanked taxpayers, suggesting that investments made into connectivity and infrastructure would not be possible without their cooperation. At present, the income tax department issues certificates of appreciation to the people who pay their taxes with honesty.
This plan of honoring top taxpayers came when the revenue department needs to look for additional resources for welfare schemes at a time of lower-than-expected revenue receipts. The direct tax receipts for the past year that ended on 31 March missed the revised target of government that was ₹12 trillion.
On Thursday, PM Modi and his Council of Ministers took oath for the second term. And on day 1 of the new government, it was announced that the scope of Pradhan Mantri Kisan Samman Nidhi (PM-KISAN), a welfare scheme for farmers, has been expanded. It would add ₹12,000 crore this fiscal to the already allocated ₹75,000 crore in the interim budget presented in Feb 2019.
The source said,
“The non-monetary privileges could involve inviting taxpayers for a special audience with the finance minister or the prime minister. For ordinary persons, an extra financial support from the government means a lot, whereas for the high earners, the extra tax that they pay may be a very small fraction of their total income and may not mean much, going by the principle of diminishing marginal utility.”
Rajat Kathuria, Director and Chief Executive at Indian Council for Research on International Economic Relations (ICRIER), said-
“By all indications, income redistribution will be a key theme under the new government, whether it is in the form of setting up pensions or of creating an environment for creating jobs and infrastructure in rural areas.”
Currently, the individuals having an income between ₹50 lakh and ₹1 crore in one year pay a surcharge of 10%. And, people earning over ₹1 crore pay a 15% surcharge on their taxable income. Also, the businesses pay a surcharge on an income of over ₹1 crore.
The domestic companies earning between ₹1-10 crore pay a 7% surcharge, which increases to 2% for foreign companies that fall in this income range.
A surcharge of 12% is applicable for domestic companies and 5% for foreign companies having incomes of over ₹10 crore. As per the data available with the I-T department, the higher is the income of individuals and businesses, the higher is the average tax collection.
Also, data indicates that 1,053 individuals with incomes of ₹5 crore or more contributed more than ₹12,000 crore in personal income tax in the assessment year 2017-18.
The experts suggest that a revival of the economic growth rate and stabilization of revenue from the goods and services tax (GST) may help the government in meeting the revenue gap. An expert committee to revise the Income Tax Act is anticipated to submit its report by the July end. This committee will guide India’s direct taxation in the time to come.