New I-T Rules
By Shivaji Sarkar
The economy is in shackles. Expecting it to thrive is a miracle. Somehow a supposedly rightist, nationalist government is using socialist mores to keep it in chains.
Even as India’s Chandrayan lands on moon to create history, it is surprising that economy is yet to take the high strand. The foremost condition for a thriving system is allowing it to flow. It is unfortunately not happening. The suggestions coming from officials are creating road block.
The economy is ailing. Slowdown in a situation like this is natural. Presently, the growth has come down to 5 per cent. If it is not allowed to blossom it can fall critically. The share market normally is not a reflection of the economy. The continuous fall in the stock index, however, is an indication of the fall in investment by the FPIs as well as domestic investors. The FPIs have withdrawn Rs 23,000 crore from the market in less than two months.
These are withdrawing for policy flip-flops. Nobody is realizing why taxes are being imposed on their earnings and again why the Finance Minister is withdrawing her own budget proposals.
Nobody explains why draconian Motor Vehicle Act that collects about Rs 1.5 crore in penalties in Haryana and Odisha alone in five days is enacted to empower the gendarmes. It causes law and order chaos and stymies free movement.
Real estate sector is gasping, banking sector is unstable, industry is in a tizzy, auto sector is preparing for a continuous fall in demand, FMCG sector is forced to cut prices owing to vanishing buyers and a member of the Prime Ministers Economic Advisory Committee Rathin Roy says that the country is in a recession.
Niti Ayog Chairman Rajiv Kumar is more candid. He says India is facing an economic downturn for the first time in 70 years, a liquidity crisis, wherein lenders have stopped funding businesses, resulting in a situation where they have to survive on cash. It’s a grim warning.
Do we have a solution? It is worse than the disease. The Union Budget 2019 has several tax-related amendments and new rules that further tighten the shackles. Whether you are buying life insurance, property or making banking transactions, the new rules that are effective from September 1, will have impact on income and taxes.
In short, it means every spender would have to be alert more on maintaining accounts of expenditure than engaging themselves on earnings or spending.
The five new commandments of the income tax department would put effective brake on productive activities. It is also likely to affect the culture of savings. It has put such a leash that everyone would prefer not to spend. That is wiser for most earners than getting into tormenting net of the tax authorities.
The wise men in the government possibly have not visualised that their rules for checking people’s pattern of purchases would effectively throw a spanner. So there are five new rules – TDS on life insurance policy, engaging a professional, even a mason, would need deduction of TDS, have to pay TDS at the time of purchase of immovable property, pay TDS on cash withdrawal and banks would keep a continuous watch and report the smallest transactions.
Yes, it is an effective police state. One of the first kingdoms that ensured a police state in this country was of Alauddin Khilji. It tightened the administration to keep every individual on check. The government needs to learn from him. Khilji ensured for the sake of his administration, the economy collapsed. India took a hundred years to come out of the morass.
The TDS itself is syndrome of uncertainty that a government suffers. It shows that the system has no faith in the people. So even before he can earn, the government extorts its share. Its rationale is never explained.
Why tax a life policy? The State needs to promote it for two reasons – providing a sense of security to the people, increasing savings and help boost the economy. Instead a tax on it, sours the mood. It hits insurance sale, savings and ultimately the government itself would be a loser. Intelligent move would have been to allow free sale, raise savings for welfare programmes and earn taxes by boosting the economic activity. The rule would ensure the opposite.
The officials possibly believe that whether there is activity or not tax realisation must improve. Good. But the real impact would be diminution of activities. At least the rule on TDS on purchase of immovable property would ensure it. The real estate is in trouble. If it is allowed sale with strings, there would be reduced buyers. Most genuine buyers do not have enough money to buy. So if TDS is levied, persons short of funds would prefer to skip a deal.
One would be paying TDS on club membership, car parking fee, electricity and water facility fees, maintenance fee, advance fee which are incidental to the transfer of a property. It raises price of a property in an inflationary market.
The fad for less cash has led to imposition of 2 per cent TDS on cash payments of above Rs 1 crore – effective denudation of Rs 2 lakh from one’s account. The subsequent questioning can lead to many heart breaks and depression. This is preposterous. As a nation do we want to stop spending by instilling fear in the citizenry? The obvious would be further thaw in the market and economy. Sooner such wise steps are done away with is the better.
The last rule virtually chains citizens. Already the rules demand statement of financial statement (SFT) above Rs 50,000 of transactions in a year. Now the banks have been ordained to report even the smallest transactions. The big brother watches continuously and extorts possibly even what you are not supposed to pay or pay in advance and get into rigmarole of arguments and litigation. It’s a beautiful police state.
Unless these wise gems of rules are removed by the BJP that had propagated liberalization since 1960s, the economy is headed for a doom. Let the people spend freely and contribute to the economy.
Prime Minister Narendra Modi has to intervene to ensure the economy flows freely for the nation to thrive. Quixotic rules must be buried deep. The nation can reach the moon. The economy has also to zip through. It’s possible only if such rules are never formulated.—INFA