SUGGESTIONS:

1. SALARY INCOME:

In the present system of INCOME UNDER THE HEAD SALARIES, there are many definitions to arrive at what is an income, perquisite etc..  There are many deductions and exemptions, making the entire computation under this head a cumbersome process.  Lots of man hours are lost in designing the salary packages and preparing the monthly payrolls, annual tax deduction documents in piles & reams of papers.  The entire paper work in turn affects the Mother Nature.

Why not consider taxing the payment made by emploYER to emploYEE either in cash or kind (rent free accommodation, free car, free telephone etc.) towards his remuneration or reward for his services in the hands of emploYEE, without there being any need for including/deducting any amount for perquisites/allowances or exempted perquisites / allowances.  The total of such amount may be taxed at a special LOWER RATE OF TAX.

The rates could be as under:

 say up to                        Rs. 2.50 lacs                          - Nil % ,  

                                        Rs.  2.51 - Rs.10.00  lacs     - 5 or 7.5 % 

                                        Rs.10.01 - Rs. 25.00 lacs    - 15 %

                                        Rs.25.01 - Rs.50.00 lacs     - 25%

                                        Above Rs. 50.00 lacs          - 30%

Of course the rates of tax may be re-considered according to the statistics to ensure that revenue is not lost but the entire exercise gets simplified.

This will have following benefits:

> Unproductive man hours spent in working salary package can be used for productive work;

> Will reduce hassles for employers;

> Will create identical salary package for all employees where ever one works;

> Simplification;

> No scope for tax avoidance;

> Will encourage better tax compliance;

> Taxation under this head may become litigation free;

>Tax administration will become easy & manpower requirement in department will reduce.

2. CAPITAL GAINS:

Do not have holding period & classification of short term & long term capital gains.  Instead provide indexation benefit for assets held for more than TWO years in all cases.  No exemption need be provided for reinvestment.  No deduction be allowed for expenses for selling.  Suggested slab rate is as under:

    Difference between sale price & purchase price                        -              5%

    Difference between sale price & indexed purchased price         -            10%

Of course the rates of tax may be re-considered according to the statistics to ensure that revenue is not lost but the entire exercise gets simplified.

3. SOURCES OF INCOME:

Entire income be taxed without specifying any heads of income ( 6 presently).  As suggested under point 1 & 2 above there can be special tax rate for those two categories.  All other income may be taxed at normal slab rate.

4. PERMANENT ACCOUNT NUMBER (PAN):

All transactions, whether for personal or business purpose, must have requirement to quote PAN.  This should be made compulsory at the time of birth of a child and should be the only number quoted till the death of a person being single identification number for tax purposes.

 

Best regards

Sanjay Dave

Managing Partner - Bangalore

K S Aiyar & Co.

Chartered Accountants

# 19/1, 2nd Cross, LowerPalace Orchards

Bangalore 560 003.

Phone : (O) 91 80 2334 7171  /  2336 7171   (D) 91 80 6599 9974

Fax     : 91 80 23311221

E-Mail : [email protected]

Web:    www.ksaiyar.com

Simplified salary taxation proposed to tax total remuneration at reduced flat rates and reduce administrative burden. Proposes a streamlined regime for SALARY INCOME treating all employer payments, cash or in kind, as a single taxable remuneration taxed at special lower slab rates to remove perquisite valuation, exemptions and deductions, and reduce administrative burden. Recommends abolishing short/long term capital gains classification, granting indexation for assets held over two years with separate rates for nominal and indexed gains. Suggests taxing all income without statutory heads, applying special rates for salary and capital gains, and mandating PAN from birth as a single tax identifier.