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PM Modi’s Thoughts on Tax – A Fact Check and Beyond

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Prime Minister Narendra Modi delivered the keynote address at the Times Now summit yesterday, and laid out a roadmap for the continuing development of India and path towards achieving $5 trillion economy by 2024. While he dwelt on a number of initiatives and policies that his government has focused on, the portion of the PM’s address focusing on tax system caught the attention of the people.

Prime Minister Narendra Modi spoke on range of subject highlighting India’s action plan for the decade. His thoughts on paying tax have found special resonance among public.

However, some eminent journalists only paid attention to his quote on 2,200 professionals declaring their incomes to be ₹1 crore in India. They argued that the numbers Prime Minister is quoting about the tax paying professionals who declared more than Rs 1 crore annual income is wrong and it is higher than 2200. A few also tweeted questions, only to delete them later.

The Truth Behind the 2,200 ‘Professional’ Tax Payers of India

PM Modi, while highlighting how his government has taken a lot of steps in the last 5 years to make India a tax compliant society, had noted that many more steps are needed. He had urged every eligible tax payer to pay their rightful due to the country to help in its development.

PM then quoted several startling statistics to throw light on the problem of tax evasion in the country-

  • In the last five years, more than 1.5 crore expensive luxury cars were sold.
  • More than three crore Indians went abroad for business trips or vacation.
  • However, only 1.5 crore pay income tax. Out of those people, there are only three lakh people who declare every year that their incomes were above ₹50 lakh.
  • A large country like India has just 2,200 professionals who have declared their annual income to be above ₹1 crore

Having quoted these figures, the PM highlighted that every Indian evading taxes here is akin to doubly penalizing the honest taxpayers, who have to bear the additional burden. He appealed to every Indian citizen to pay their taxes honestly, as it is funds helps in developing infrastructure and public welfare and funds all the poverty alleviation program.

To those who casted doubts on the figure quoted by PM regarding those declaring income above ₹1 crore, it is important to note here that PM clearly mentioned that just 2,200 professionals like Doctor, Chartered Accountant etc. declaring their income above ₹1 crore. It is important to distinguish between salaried class or business men declaring income above ₹1 crore and professionals. PM referred to the latter.

While a lot of confusion being spread about the meaning of professionals, it is important to remember that the word professional is very clearly defined in Section 44A and Section 194J of the Income Tax Act 1961 (amended 2019) in the following manner:

  • Section 44AA (1) of the Income Tax Act clearly identifies a professional as – every person carrying on legal, medical, engineering or architectural profession or the profession of accountancy or technical consultancy or interior decoration or any other profession as is notified by the Board in the Official Gazette
  • Sec 194J reiterates the same to clearly state that – “professional services” means services rendered by a person in the course of carrying on legal, medical, engineering or architectural profession or the profession of accountancy or technical consultancy or interior decoration or advertising or such other profession as is notified by the Board for the purposes of section 44AA or of this section.

It is under this ambit that the true and uncomfortable question has been put out in front of the people. People should introspect on this question, and understand the conundrum posed by these definitions and the penalties it creates on those who honestly pay taxes. ‘Eminent journalists’ would do well to stop spreading their malicious propaganda.

From Process Driven to Public Driven – Revamping the Tax System

In this event, PM Modi elaborated on how the taxation system in India has moved from being a process-centric system to public-centric system. He added how unlike previous governments which hesitated to touch the tax system, his government was working to make it more citizen centric. He assured everyone that tax harassment will become a thing of the past.

It is important to note that several steps taken by the government over the past 5 years stand as testimonial backing up this this statement of PM Modi.

India is set to become one of the few countries in the world to have a clearly spelt out Charter of Tax Payer Rights with statutory backing.  This will ensure that the tax payer have their rights explicitly enshrined in law, and every tax payer will be aware of their rights now.

Following the faceless assessment announced in the previous budget that eliminated human interference and discretion from assessment, faceless appeals are now being incorporated from this year onwards by amending the Income Tax Act 1961. This will further remove discretion and interference from the process, making it fairer for the taxpayer.

Even as the  Legacy Dispute Resolution Scheme – Sabka Vishwas – has been successful with 70% of the eligible tax payers resolving their disputes, the government has extended the trust venture by introducing the Vivad Se Vishwas Scheme to further reduce tax litigations. Under Vivad se Vishwas, only the disputed amount needs to be paid with all interests and penalties that have been accrued to be waived.

This citizen-centric focus of the government also extends to giving the tax payers their due respect for contributing towards the development of the country. While Piyush Goyal emphatic and heartfelt thanks to tax payers during the 2019 interim budget still remains in everyone minds, the government followed up on these heartfelt thanks by actually putting more money into the pockets of tax payers.

Since then tax slab has been raised to ₹5 lakh, corporate tax has been cut to world class competitive levels and now personal income tax rates have further been cut down. This along with rationalization of deductions from over 100 to 30 has ensured that a simplified easy to pay and lower rate tax regime has been put into place.

Not to forget about massive reforms in the indirect tax sphere, PM Modi’s government undertook the largest tax reform in the world by introducing GST, making India a one-nation-one tax market. While the government continues to simplify the GST system, it is important to note as the PM said in his speech, the average GST rate has been brought down from 14.4% to 11.8% since the launch of GST, demonstrating flexibility in policy outlook.

A Century of Decisions In Less Than a Year

PM Modi also spoke about his government taking “A century worth of Decisions” within 1 year of being re-elected. These included monumental enactments, such as the regularisation of unauthorised colonies in Delhi, the abrogation of Article 370 of the Constitution, banning triple talaq, reducing corporate tax, forming a Ram temple trust, and amending the citizenship law to accommodate persecuted religious minorities from Pakistan, Bangladesh and Afghanistan.

PM Modi said while achieving the goal of $5 trillion is not going to be easy, it is better to set stiff targets and work hard towards them rather than being directionless. Indicating that India is moving at a very fast pace, PM Modi added that what the nation saw in the last 8 months was just a sample, as the real actions are going to start soon!