My thoughts on taxation, Indian Economy…

My Thoughts…..

Well its budget time now, most of us would watch only one segment in that. TAX because that decides many things and has a cascading effect.

Why are people taxed?

It is for the basic functioning of govt. It can prepare new schemes to uplift the poor & infrastructure of the country. Well this is what we all are taught in school. But do we really care about how the money is spent. Most of us know only a little portion of sum allocated for schemes are reaching the needy. Rest is in the hands of politicians, govt. officials, contractors. They in turn evade tax & total money is getting accumulated in hands of few, so revenue to govt. gets decreased & ultimately taxes are increased.

Where is the money spent?

Well you will get the graph with portion of one Re spent on each sector & the same for revenue. Before that let me tell you where are we losing our money.
**Developmental schemes: Typically food for work, employment guarantee scheme, etc. [Politicians would have a major share of it]
**Infrastructure schemes: Roads, Railways, Medical, etc [senior govt. officials have major chunk of it]
**Defense: Well no one knows exactly but most of which are spent on the border… [Let’s leave it for the 'sake' of security of nation
**Research & Development: Being a son of one who works in R&D, i know thousands of crores of Rs are being spent rather wasted in the name of R&D .Literally speaking there is little or 0 developments from these investments. Will need a separate post to explain things on what I see…

Why was India not developing at the same pace when it had closed economy?

Well the answer is present implicitly in the previous answer. We had closed economy till early 90's.All the tax we paid got into black hole called corruption & govt. couldn’t work on infrastructure, couldn’t provide employment. So it opened up the economy. We had some growth before the IT boom in the fields of automobile industry & electronics, communication. But the incoming of IT to India overshadowed the growth of these sectors & have created a thousand times employment than the govt. can ever imagine. So India is growing at a larger pace due to large inflow of money for the IT&ITES services.

On Taxes for the high earning class (typically the software guys)
Well to tax further more on these guys will make India back to square 1 & it can’t grow due to the corrupt politicians. Soon India will become a 'poor' country then. Taxing on middle class is not possible by any govt. considering the coalition politics on centre.

Where does the govt. can get the money then?
Well mostly govt. gets its revenue from indirect taxes. India pays one of the heftiest service taxes of 10.2%. It was estimated that 5-7% of our entire GDP came from Service tax. There is always import duty on many items. Only electronics item’s import duty was reduced to make the IT boom into a larger one. Oil has one of heftiest tax but again govt. gives subsidy to stabilize the inflation rate & to keep the interests of middle class.

On Fringe benefit tax…

There is a general perception that these days’ youth in IT field earn lot & therefore they were the soft targets as usual. Often called as Fraud bad tax, they target on the ‘perks’ given to them. Telephone bills, car allowances, flight tickets, med-claim & whole lot of allowances. I said soft targets because all these are enjoyed by the higher rank govt. officials, ministers, M.L.As, MPs. Why doesn’t the govt. tax them? These people enjoy lot more than their working counterparts [IT guys]. Because reason is obvious no minister would like to tax himself more

Hoping for a 'GOOD' Budget..
Well Im a novice in the subject I have written, so if im wrong plz correct me.

PS: Politicians in the above post refer to corrupt ones.


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