The government is talking tough now. In a bid to widen the tax base and increase revenues from taxes, it is sending out a second set of "polite letters", numbering over 35,000, to income tax assessees. For now, the letters include simple queries on whether or not they have filed their income tax returns as well as the details of the filing.
The letters will be converted into notices should the assessees not respond, Revenue Secretary Sumit Bose said at an event organized by the Federation of Indian Chambers of Commerce and Industry (Ficci).
In his Union Budget for fiscal year 2013-14, Finance Minister P. Chidambaram has proposed a 10 per cent surcharge on all individuals with a taxable income of Rs 1 crore or more -- a move expected to fetch an additional Rs 13,000 crore -- sparking off a debate. Only 42,800 of the country's 1.2 billion population have admitted to earning a taxable income of Rs. 1 crore or more, which the Finance Minister said was "shocking".
"It is shocking that only 42,800 people and firms admit to earning over Rs. 1 crore. Many more earn, but only so many admit," the Finance Minister told NDTV in a post-Budget interview. Delhi alone might have that many people, he said, adding: "You cannot hide any longer, we have far too much information." The surcharge is applicable for a year.
The government has already issued notices to 35,000 people asking them to explain why they have not filed returns.
"In income tax, there is no case for amnesty. Because now almost all returns are online except a small category which was exempt. We have a huge amount of data which is being mined. Therefore, there is no case for amnesty today. Best case I can make out is tell people, 'Please don't hide your income.' Just admit your income and pay tax and be a proud citizen," the Finance Minister told PTI in an interview.
High-earning Indians gave a collective groan when Mr. Chidambaram imposed the surcharge. The Finance Minister, seeking that extra cash to fund a dash for growth, said he expected those affected to pay up "cheerfully".
"There is a substantial number of people with good income who are not paying taxes and the focus should have been more on bringing them under the tax net," said Sunil Duggal, CEO of Dabur India. Adi Godrej, chairman of Godrej Industries, too had voiced his objection, saying: "Any increase in taxes (on rich) will create a negative perception on investment", while Ficci had said it will discourage entrepreneurship and damage investor confidence.
Mr Chidambaram allayed concerns that the tax on the 'super rich' would drive away people. On a lighter note, he told PTI: "Nobody will move anywhere, I assure you. Nowhere in the world you can afford to employ so many domestic helps."
Not all of India Inc. is miffed though. The surcharge proposal has its supporters. Narayan Murthy, chairman emeritus of Infosys; Deepak Parekh, chairman of HDFC, and Rajan Bharti Mittal, vice-chairman and managing director of Bharti Enterprises, welcomed the move.
"...happy to pay 10 per cent extra. It won't hurt corporate sentiment," Mr Murthy had said. "The rich had to be taxed. It's fair," Mr Parekh added.
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