The absurdity of Personal Income Tax Declarations: Tycoons pay peanuts

On 06th October 2016

Let us call it as Z Family –  One of the richest in the country
Relationship Income AY 2013-14 Tax paid
Mother Rs.1.6 Crores Rs.34 Lakhs
Elder Daughter in law Rs.4.45 Lakhs Rs.25228
Elder Son Rs.15.40 Crores Rs.4.44 Crores
Younger Son Rs.10.23 Crores Rs.3.12 Crores

A whistleblower from Income Tax (ITO) department has provided us the sensitive data of Income Tax payment details of big tycoons. It demonstrates how the big tycoons pay almost nothing as Personal Income Tax. It also exposes that India has to evolve to a new system to replace the archaic Income Tax law. As the data is sensitive and involves a series of privacy violations we have decided not to disclose the full identity of the taxpayer. This data is from the Income Tax circle in Mumbai where the richest live.

If the big tycoons are paying peanuts as Personal Income Tax, what is the use of this archaic Income Tax system?

We are providing you the details of the Personal Income Tax paid by certain members of one of the richest families in India. To our shock and amazement, the lady of this family paid only Rs. 25,228 ($375) as Income Tax for the Assessment Year (AY) 2013-14. Every media house in this country at least twice or thrice a year covers her lavish living style and assets, which shockingly never match with her Personal Income Tax paid. Let us call her Mrs. Z. In her IT return she declared her personal income to be a mere Rs. 444,940 ($6,676) on July 31, 2013. That is less than one round trip to New York! The Income Tax which assessed her return on March 30, 2016 made no objections!!

Her baron husband, who is one of the India’s top businessmen having stakes in several media houses declared his personal Income for AY 2013-14 as Rs. 15,40,12,160 ($2.31 million) along with his wife on the same day. No objection from Income Tax assessment officer and he paid Rs. 4,44,73,565 ($666,000) as Personal Income Tax.

But miraculously(!) his younger brother’s creative accounting was caught by the Income Tax Assessing Officer. Mrs. Z’s husband’s brother is also a big business tycoon and also has a habit of being selectively truthful. He allegedly lied in courts but somehow managed to stay out of the clutches of the law. On October 30, 2013, the younger brother-in-law of Mrs. Z filed his Tax Return by declaring his personal Income as just Rs. 5,67,650 ($8516) – though he is a promoter of more than 100 companies. But the Income Tax Assessing Officer showed no mercy and on February 29, 2016, found his personal Income as Rs. 10,23,11,939 ($1.54 million), calculating the salary declared in several companies to Registrar of Companies (RoC). He was forced to pay Rs.3,12,39,289 ($468,000) as Personal Income Tax. One hopes that by now the ITO has written a software program that will use the PAN number and then crawl the RoC website and establish a minimum salary as declared by these juggernauts.

If the big tycoons are paying peanuts as Personal Income Tax, what is the use of this archaic Income Tax system?

The mother of these two brothers, who is considered as the lucky charm of their late tycoon father (a small time trader who became a success after marrying this lady and struck gold in the 70s) had declared her Personal Income Tax as Rs. 1, 16,72,150 ($174,000). She also filed the Income Tax Returns on the same day as her elder daughter-in-law Mrs. Z and son. No objections from the Assessing Officer and she paid a Personal Income Tax of Rs.34,26,444 ($51,000).

If the big tycoons are paying peanuts as Personal Income Tax, what is the use of this archaic Income Tax system? Recently through the much hyped Income Declaration Scheme (IDS), the country got only declaration of around Rs. 65,000 crores ($9.75 billion) and got Income Tax of around Rs. 29,000 crores ($4.35 billion). The whole Income Tax system of this country got declaration of money from around more than 64,000 people and that means that the average declaration was only around Rs. One crore ($150,000). As per the 2013 Budget speech, in India, only around 42,000 people have declared that their annual Income as being more than Rs. One crore ($150,000). This country has around 5 crore (50 million) Income Tax paying people. The whole tax structure looks false and absurd when declarations from people such as Mrs. Z declare their personal Income as around just Rs. 4 lakhs ($6676) and pay just Rs. 25,000 ($375) as Personal Income Tax. We need a thorough revamp on our tax structure where people happily love to pay tax. This archaic Income Tax system must work for the benefit of this country of 1.25 billion people, where less than 5% pay Income Tax.

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