The Centre must stop introducing new
levies designed to spoon-feed data to the taxman (The Hindu)
Mains Paper 3: Economy
Prelims level: Liberalised Remittance Scheme
Mains level: Indian Economy and issues relating to mobilization of resources
- The norm for Budget presentations to wax eloquent about the government’s
commitment to easing the compliance burden for honest taxpayers and its
keenness to promote ‘ease of living’ and ‘ease of doing business’.
- But the fine print in the accompanying Finance Bill usually has the
opposite effect — of making life infinitely more complicated for the
Liberalised Remittance Scheme:
- A good instance of this in the latest Budget is the decision to impose
Tax Collection at Source (TCS) on remittances under RBI’s Liberalised
Remittance Scheme (LRS).
- From April 1, the Centre has required all authorised foreign exchange
dealers who remit sums in excess of ₹7 lakh under LRS and sellers of
overseas tours packages, to collect a 5 per cent TCS from the spender, to
deposit with the taxman.
- While the stated intent of this is to widen the tax base, it imposes an
unnecessary compliance burden on individuals for legitimate transactions
that are not even liable to tax.
Impact of Tax Collection at Source:
- Initially introduced to pin down high-value car and jewellery purchases
funded by hard cash, the TCS levy has lately spread its tentacles to cover a
wide range of unrelated transactions that the taxman suspects are conduits
for evasion, even if routed through banking channels.
- Apart from LRS, TCS provisions now apply to the sale of alcohol, timber,
minerals, scrap and vehicles exceeding ₹10 lakh in value for ‘trading
purposes’ and even sale of goods of value exceeding ₹50 lakh.
- The new TCS on LRS will cause undue hardship not only for Indians
undertaking one-off capital transactions overseas, but also for tourists in
transit in India and parents with wards pursuing overseas education, who
need to frequently remit living expenses and fees.
- The Centre’s view seems to be that TCS isn’t a burden given that the
remitter can claim credit for it when he files his annual tax return,
there’s really no good reason why an individual must lock up his cash flows
with the tax department for months on end, for a transaction that isn’t even
liable to tax.
- Given that LRS remittances can only be routed through authorised banks
and require documentation, it is unclear why the tax administration cannot
collect this information from authorised dealers and match it with
individual tax returns to identify evaders.
- Instead of sweeping more items under TCS or TDS, the Centre needs to ask
why the tax administration needs to be spoon-fed so much new data by the
taxpayer, when it is already collecting truckloads of information from TDS
filings, Annual Information Returns and a host of new disclosures demanded
in the IT returns each year.
- With the tax database now carrying details of both the PAN and Aadhaar
numbers of taxpayers and GST returns available to cross-verify data, the
Indian tax administration should be able to rely on in-house data mining and
artificial intelligence capabilities to track down evasion without resorting
to blunt instruments such as TCS.
Q.1) With reference to the Genome India Project, consider the following
1. The Genome India Project, involve over 20 scientists from institutions
including the Indian Institute of Science (IISc) in Bengaluru and a few IITs.
2. Genome maps are two-dimensional, much like the DNA molecules that make up the
Which of the statements given above is/are correct?
(a) 1 only
(b) 2 only
Q.1) The decision to impose Tax Collection at Source on remittances under
RBI’s Liberalised Remittance Scheme will make life more complicated for the
taxpayer. Critically examine the statement.