Too many people focus on the producers’ side and not on the savings side and we need to keep that in mind. The other aspect is whether there could be some tax benefit to savings. Remember, the government increased the limits for tax benefited savings by Rs 50,000 in the last budget and the question is that is there room for more, primarily because the real tax benefit has fallen over time as the limit was at Rs 1 lakh for too long. Maybe what we have to do is to increase that (tax exemption limit).
The Governor’s statement just a few weeks before the Budget is not perhaps very surprising as you need not be the Governor of Reserve Bank to know that the exemption limit will be enhanced. The one lakh limit came in the Finance Act 2005 and remained static till 2014.
The US Income Tax
IN 1894, Congress enacted a flat rate Federal income tax, which was ruled unconstitutional by the U.S. Supreme Court because it was a direct tax not apportioned according to the population of each state.
Theodore Roosevelt stated on Income Tax:
As a matter of personal conviction, and without pretending to discuss the details or formulate the system, I feel that we shall ultimately have to consider the adoption of some such scheme as that of a progressive tax on all fortunes, beyond a certain amount either given in life or devised or bequeathed upon death to any individual – a tax so framed as to put it out of the power of the owner of one of these enormous fortunes to hand on more than a certain amount to any one individual; the tax, of course, to be imposed by the National and not the State Government. Such taxation should, of course, be aimed merely at the inheritance or transmission in their entirety of those fortunes swollen beyond all healthy limits .
Quashing the tax, the US Supreme Court concluded –
1. That a tax upon real and personal property is a direct tax within the meaning of the constitution, and, as such, in order to be valid, must be apportioned among the several states according to their respective population
2. That the incomes derived or realized from such property are an inseparable incident thereof, and so far partake of the nature of the property out of which they arise as to stand upon the same footing as the property itself. From these premises the conclusion is reached that a tax on incomes arising from both real and personal property is a ‘direct tax,’ and subject to the same rule of apportionment as a tax laid directly on the property itself, and not being so imposed by the act of 1894, according to the rule of numbers, is unconstitutional and void.
3. That the invalidity of the tax on incomes from real and personal property being established, the remaining portions of the income tax law are also void, notwithstanding the fact that such remaining portions clearly come within the class of taxes designated as duties or excises, in respect to which the rule of apportionment has no application, but which are controlled and regulated by the rule of uniformity.
Dissenting with the majority judgement, one of the Judges remarked,
It is, I submit, greatly to be deplored that after more than 100 years of our national existence, after the government has withstood the strain of foreign wars and the dread ordeal of civil strife, and its people have become united and powerful, this court should consider itself compelled to go back to a long repudiated and rejected theory of the constitution, by which the government is deprived of an inherent attribute of its being -a necessary power of taxation.
The 16th amendment, ratified in 1913, removed this objection by allowing the Federal government to tax the income of individuals without regard to the population of each State. The amendment to the Constitution reads:
The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several States, and without regard to any census or enumeration .
And it continues – 102 years and still going strong.
Shortfall in Revenue Targets – Beware Ides of March:
THE CBEC Chairman in a letter to the Chief Commissioners reminds them that while the Department has been entrusted with a challenging task of collecting Rs. 6,23,244 crore at a growth of about 25.8%, the actual collection of Rs. 3,77,648 crore upto December, 2014 is far from satisfactory.
It seems an assurance was given to the Finance Minister during the Conferences held in September and November, 2014 that the Department would not leave any stone unturned to achieve the target or at least narrow the gap as much as possible.
Many stones indeed need to turn.
The Chairman informs the Chief Commissioners that tax collections are also being closely monitored by the Prime Minister who has desired that all out efforts should be made to achieve the Budget Estimates.
The Chairman wants the officers to share the Board’s urgency in augmenting revenue.
He has urged the Chief Commissioners to ensure that all taxes due to the Central Government are collected in a fair, judicious and non-adversarial manner.
The Chairman concludes:
You are advised to conduct a detailed analysis of overall revenue growth upto December, 2014 as compared to previous year, reasons for shortfall/ gain, if any, along with sectoral analysis (major commodities/Services and importers/assessees/taxpayers), projections from various ARM measures and projections for the current FY. In order to facilitate a structured discussion during the review meetings, a monthly report for the period December, 2014 to March, 2015 in the format enclosed may be sent by email to firstname.lastname@example.org by the 15′” of each month for the remaining months of the current financial year. The report in respect of December, 2014 may be sent by 05.2.2015 positively .
Be as far away from taxmen as possible in the next two months.
CBEC Chairman’s D.O. Letter F. No.296/219/2014-CX.9, Dated: February 02, 2015.
Central Excise Day – Year of Taxpayers Services
THE CBEC Member Shashi Bhushan Singh in a D.O Letter to the Chief Commissioners has informed them that CBEC has decided that year 2015 is to be celebrated as the ‘Year of Taxpayers Services’.
He recalls that Government has time and again stressed on initiatives designed to foster voluntary compliance through increased efficiency in delivery of services to taxpayers, transforming the attitude of taxpayers towards paying taxes through continuous education and instituting a service-focused culture within the indirect tax administration. With this in view, it is proposed that while planning the celebrations for the Central Excise Day, 2015, the above theme is to be kept in mind.
Central Excise Day is to be celebrated on 24th February.