Taxpayers demand benefits for paying taxes

Instead of introducing Rs 5,000 - Rs 10,000 penalties on late filers of Income Tax (I-T) return the taxpayers want the government to come out with positive approach and introduce incentives to I-T return filers. The social media message goes on, privilege card to those paying taxes above certain limit, and to entitle assesses with benefits like priority quota in railway tickets.

Introduction of medical insurance, life insurance on basis of average ITR filed like coverage up to twice of gross income in ITR filed for mediclaim and ten times risk cover in case of life insurance will be of help. Similarly, introduction of pension after 65 years of age on the basis of tax paid by tax payer during his/her working life, the taxpayers have demanded.

Taking a small example that while the government can make changes in the laws and policies regularly, for the taxpayers even the time period to revise the return in the wake of discoveries of any mistake has been reduced considerably and if they discover any mistake after the permitted due time, the taxpayers have to bear huge burden in the name of additional tax.

Talking to Bizz Buzz, Abhishek Aneja, a New Delhi based tax expert said, “Would you like to pay for something that others are enjoying for free? Ironically, many taxpayers feel the same way. When we talk about western countries, some provide benefits like free healthcare, free education, and social security to their citizens.”

In India, people belonging to lower income groups, who usually pay no tax, send their children to government schools and go to government hospitals for treatment. People under the EWS (Economically Weaker Section) category or those belonging to certain castes are also sometimes eligible for many freebies and government schemes. Their children can even qualify to study in private schools, and they can receive medical treatment in private hospitals without paying a penny, he said.

In contrast, middle-income individuals, especially those dependent on salary income, pay a significant amount of taxes to the government but don't utilize government-provided education or medical services. They are also not eligible for government schemes that offer these services for free or at subsidized rates. Consequently, many such taxpayers question what they are receiving in return from the government, he added.

According to Aneja, “In recent years, tax policies have become more stringent, and many benefits that were previously available have been reduced or discontinued. Especially after the recent budget, this sentiment has grown stronger.”

Despite the welcome changes proposed in the budget, like higher exemption limit for capital gain, the feeling of a kind of disconnect between the policy makers and citizens is reflected by the proposed changes in taxation rules, as common middle-class citizens' concerns have not been considered. Basant Das, Cost and Management Accountant, Navi Mumbai, said, “Proposed changes in the tax laws are not going well with the middle class. Because most of the middle class people will be losing by paying higher capital gain taxes due to the removal of the indexation benefit on the sale of properties.”

Ignoring inflation impact on cost of acquisition in the proposed changes may result in tax liability in case of losses, too (in real sense). So, the government must think about withdrawing the proposed change, he said.

Secondly, government should move towards a regime to incentivize the people so that they will be inclined to file the returns on their own without any fear of penalty and it can be done only by providing them some sort of exclusive extra facilities which should not to be available to the non-filers. Medical insurance, pension, life insurance, etc, may be the options that a government can provide as a reward to the honest and regular taxpayers, he said.

I would like to suggest that here, the continuity of filing of returns should also be given weightage in accordance with the number of years of the returns filed so that the taxpayer will be motivated to file the return on yearly basis, he added.