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How Saral form got complex

The recent brouhaha on the introduction of the new form for submitting the personal tax return is from expected quarters and is similar to the outcry made when a nominal tax was introduced on cash withdrawal from banks.

india Updated: Jun 14, 2006 03:17 IST

The recent brouhaha on the introduction of the new form for submitting the personal tax return is from expected quarters and is similar to the outcry made when a nominal tax was introduced on cash withdrawal from banks. On both occasions, the objective of the Revenue Department was a laudable one; to get a better handle on and create a paper trail of unaccounted incomes and curb the parallel economy. A cash-flow statement allows a comparison of declared incomes with stated expenditures and throws up significant mismatches, which helps identify parallel economy transactions. 

It is useful to set aside a couple of myths which have been created by those who are going to be hurt and lapped up with suspicious alacrity by the media. First, the new form is not any longer or more complex than the existing form. It is longer only because care has now been taken to make it more user-friendly and include details that would otherwise be given as annexures. Second, the cash balance statement required to be filled is not hugely complex affair or a chartered accountant's delight. It will, in fact, be a fairly straightforward exercise for the likes of you and me and all salaried and law-abiding citizens. You tell them how much money you had at the beginning of the year, the annual income, major expenditures and the final bank balance. I suppose all families do this as part of their regular household management.

So why then, one may ask, is this great outcry about this change in the personal tax form, including from ruling party echelons and the Left, and why has the Ministry of Finance now gone back on its introduction in the face of nearly all-round opposition?

The reason is not far too seek. The ministry remains oblivious to the need of building coalitions or influencing public opinion which are, of course, a must in any democracy. CBDT officials continue to believe that this is a command economy in which they can rule by diktat. The same measure could have been introduced after explaining it to the public and inviting comments. The rationale could have been explained and the public could have been told that the real targets for the measure are those who habitually buy properties in benami transactions and fund their campaigns exclusively with cash payments. This would have seen the entire salaried class come out in support of the measure rather than be opposed to it after being hoodwinked by a garrulous media that thrives on sensationalizing and making government-baiting a national sport.

Even more effective would have been to initially require the cash-flow statement only from taxpayers with incomes are above Rs. 50 lakh a year or, at least, restrict it to those paying a 30 per cent tax.

(Rajiv Kumar is Director and Chief Executive, ICRIER)