What would be good to see is a rationalization of income tax rates. Why can't we move away from the regime of tax-slabs, tax-exemptions and tax-rebates, and instead move to a simplified taxation system with the following basic rules -
1. Flat rate of 10% income tax 2. Persons with annual income less than Rs.2,00,000 to be exempt from income tax 3. Persons with annual income greater than Rs.10,00,000 to be levied 10% surcharge on income tax
This simplified regime would have several significant benefits -
1. Much less paper-work... no proof-submission for investments, bills/receipts etc. 2. Much less calculations involved... therefore, almost no room for errors. And most importantly, much less effort and cost for the government and for individuals 3. But what can be expected as the most significant benefit is that, this simplified structure would encourage many more income earners to file tax returns
Imagine how big government's tax kitty would grow with this simple measure and how the cost of administration of Income Tax would come down crashing. It would be heartening to see the Finance Minister to seriously consider this suggestion and earnestly work in this direction.
