Thursday, February 27, 2014

Does India Really Need Income Tax ?....A Revolutionary Idea That Opens The Mind

If you have reached this page I assume that you too are fascinated by a workable scenario for India with ZERO tax on income.

There has been a lot of talk about radically reforming the tax system in India most notably by Arth Kranti based out of Pune which like the tweaked proposal I am presenting under can free India totally from any sort of Income Tax, Corporate Tax, Excise, Sales Tax and Service Tax etc.

To put things in perspective various taxes collected by the government are as under (figures are rounded off for ease of calculation)

Corporate Tax: Rs.4,50,000 crore

Income Tax: Rs.3,00,000 crore

Wealth Tax:Rs.1000 crore

Excise Duties: Rs.2,00,000 crore

Customs Duties: Rs.2,00,000 crore (proposed to be retained for domestic protection)

Service Tax: Rs.2,15,000 crore

Other Taxes: Rs.4,000 crore

Total Government revenue apart from Customs duties : Rs.11,70,000 crore. This is the sum the government earns from ALL taxes in India and approximately 27% goes to the states and 73% is with the centre which remains constant for this model too.

The Proposal

There would be a simple one point Banking Transaction Tax (BTT) at a minimum rate of 0.7% of all transactions through banking channels at the receipt account only which is credited into the government treasury immediately.

To illustrate : If you were to receive a sum of Rs.1,00,000 in your bank account Rs.700 would be transferred as BTT to the government. That’s it. No Other Taxes At All.. No Income tax,no corporate tax, no excise duties, no VAT, no service tax of any kind at all.

Any amount of cash deposited into any bank would attract the same 0.7% from the recipient account and the balance becomes legitimate “white” money.

The Details

For this proposal to be successful we need a total dismantling of all government taxes at all levels state and centre with NO direct or indirect taxes at all on any transaction/service/manufacturing. The only exception being import duty of customs to protect domestic industry.

All receipts to be routed through banking channels including cheques,payorders,debit and credit cards,net banking and mobile payments. Minimum dependence on cash with a maximum bank note of Rs.100 and no legal sanction to any cash transaction over Rs.5000 (ie no ownership rights or legal status to any payment made in cash over Rs.5000). All single cash transactions below Rs.5000 exempt from BTT or any other levy.

No Income Tax scrutiny or questions and a definite time frame to citizens to deposit any amount of cash into their bank accounts with a flat 0.7% BTT and “clean” their money with full legitimate status.

The Revenue Generation

The sum total of narrow money M1 in India is the total of floating printed currency and money that can be converted almost instantly into currency like savings/current bank accounts, credit limits by banks etc. M1 is the narrowest or most restrictive idea of money that is the basis for the medium of exchange within the economy. This category of money is considered to be the most readily available for transactions and commerce.

The M1 in circulation in India is Rs.20,00,000 crores which is the basis of all transactions in cash and banking channels in the country.

In India only 20% of all transactions take place through banking channels and the rest 80% in cash. Now assuming a very conservative rate of 20% of this Rs.20,00,000 crores is moved through banking channels every day and attracts a BTT of 0.7% only at the recipient level the total tax collection of the government would be as under:

M1 transacted every day: Rs.20,00,000 crore x 25% =Rs.5,00,000 crore

BTT generated every day: Rs.5,00,000 crore x 0.7% = Rs.3500 crore or Rs.12,77,500 crore annually which is far more than what the government generates presently (Rs.11,77,000 crores)from all tax sources.

The Benefits to Citizens

1) No Income Tax, Corporate Tax, Wealth Tax ,VAT or Service Tax

2) Substantial savings in terms of accounting manpower and costs.

3) No tax on Savings or interest thereon

4) Black Money generation curbed and corruption becomes inconvenient

5) More disposable incomes . Substantial savings in terms of indirect taxation being removed.

6) One point tax. Prior tax calculation easy and sure.

7) Secure transactions with money trail all through the chain.

The Benefits to Corporates

1) No Corporate Tax, No excise, No Service Tax, No Dividend Distribution tax equates lower costs and lower selling prices and higher demand.

2) Substantial savings in terms of manpower and records.

3) No corruption scams and cash transactions which may be dubious.

4) Cheaper finance available due to adequate availability if funds in the banking system.

The Benefits to the Government

1) Instant Credit of Tax monies

2) Check on corruption due to no cash transactions

3) Man power savings with no tax collection and scrutiny required

4) Recovery of Government debts

5) Options for Fake currency eliminated being unviable for small denominations

6) Definitive Money trail for checking terrorism activities etc.

7) Across the board increase in purchasing power and growth stimulated.

8) Elimination of Fiscal Deficit- As transaction and compliance increases and the amount of money M1 through banking channels increases to 40 or 60% the revenue generation would be exponential exceeding over Rs.40,00,000 crores for the government per year turning it revenue surplus.

The Arguments against

It may be argued that the system is flawed as it requires

1) Elimination of high value currency transactions

2) Revamp of the Tax system totally and empowering the banking system much more for a population dependent on cash transactions.

3) That the system is not progressive and taxes rich and poor alike at the same level.

4) That gold or foreign currency may be used for black money transactions

5) That transactions between family members would attract the BTT too taxing inter family transfers.

6) That financial transactions would become unviable with a BTT at every step basically eliminating any arbitrage business or financial investments especially very short term borrowings like overnight calls or 1-2 week corporate borrowings.

The Net Effect

The removal of all indirect taxes will lead to much lower domestic prices and higher disposable incomes propelling demand and growth of the country.

The exclusion of savings including Fixed deposits in banks from taxation will give higher incentives to save and in turn lead to lower borrowing costs for industry and higher capital formation.

The attractive rate of taxation at only 0.7% would make black money redundant and people insist on having above board transactions. A deposit of Rs.1 crore would entail a tax outflow of only Rs.70000 compared to about 35 lacs as of now. The tax payout will be too small and painless to even bother to evade. Compliance will be far more convenient.

The governments monitoring would only be to ensure that the growth in M1 money supply is restricted to the growth in GDP and that would restrict inflationary pressures on the economy while promoting growth.

Finally, to facilitate and protect very short term financial borrowings, the banks would need to deposit the collected tax to the government on the 30th day from date of collection thereby giving them access to FREE funds for 30 days to be given out for short term borrowings at interest rates of 0-0.3% which even after accounting for the BTT would be viable for any transaction at interest rates lower than those prevalent today.

While its revenue replacement proposal might seem radical please do not approach it superficially and fail to account for lower collection expenses, freeing of government capital resources and the gains that accrue to individuals and small businesses freed from filing returns and maintaining accounts, not to forget the transparency and encouragement to those in the lower spectrum to enter the banking system.

If you find any flaws or have any questions please do not hesitate to ask or criticize in the comment box below as that will enable this system to be fine tuned till it is perfect.

Wednesday, May 2, 2012

Playing With Words...

One of the world's best known short stories in six words by Hemingway..

For sale: baby shoes, never worn.

In a new style very suited to our fast paced life where we usually don't have the time to read copious literature brevity has developed into an art.

The following are twelve stories all below 15 words... Enjoy them and feel free to add to them ..

1) The Daily Grind

I really hate my job! I'm quitting! Tomorrow.

2)See you in Hell!

And next thing I know, there he is!

3) The Impossible

"Let me give you my unbiased opinion here..."

4) Suicide

"You've wronged me, and now you must pay!"

5) If God Is for Me, Who Can Be Against Me?


6) An Answer to Prayer

"Um... no."

7) The Unhappiest Man Who Ever Lived

"Forgive? Never!"

8) The Grand Illusion

"I am in control!"

9) Religion,Sex and Mystery..

Good God, I'm pregnant; I wonder who did it.

10) The Proposal

He asked her as the lift gave way. She smiled.
They fell, in love.

11) Knock

The last man on Earth sat alone in a room.
There was a knock on the door...

12) Happily Married

Longed for him. Got him. Shit.

Friday, April 6, 2012

The Reality of Wealth and The Colour of Money

The following is not fiction but a true reproduction of facts and with a view point that I personally subscribe to….

In 1923, eight of the wealthiest people in the world met. Their combined
 wealth, it is estimated, exceeded the wealth of the government of the United States at that time. These men certainly knew how to make a living and accumulate wealth.

 But let's examine what happened to them 25 years later.

 1. President of the largest steel company, Charles Schwab, lived on borrowed capital for five years before he died bankrupt.

 2. President of the largest gas company, Howard Hubson, went insane.

 3. One of the greatest commodity traders, Arthur Cutton, died insolvent.

 4. President of the New York Stock Exchange, Richard Whitney, was sent to jail.

 5. A member of the President's Cabinet, Albert Fall, was pardoned from jail
 to go home and die in peace.

 6. The greatest "bear" on Wall Street, Jessie Livermore, committed suicide.

 7. President of the world's greatest monopoly, Ivar Krueger, committed

 8. President of the Bank of International Settlement, Leon Fraser, committed suicide.

 What they forgot was how to make a life! Money in itself is not evil! Money
 provides food for the hungry, medicine for the sick, clothes for the needy.
 Money is only a medium of exchange. We need two kinds of education. One that teaches us how to make a living and one that teaches us how to live. There are people who are so engrossed in their professional life that they neglect their family, health and social responsibilities. If asked why they do this they would reply that they were doing it for their family.

 Our kids are sleeping when we leave home. They are sleeping when we come home. Twenty years later, we'll turn back, and they'll all be gone. Without water, a ship cannot move. The ship needs water, but if the water gets into the ship, the ship will face problems. What was once a means of living for the ship will now become a means of destruction. Similarly we live in a time where earning is a necessity but let not the earning enter our hearts, for what was once a means of living will be become a means of destruction.

 So take a moment and ask yourself....has water entered my ship?

Saturday, March 3, 2012

All That Glitters....

 It was by pure chance that my wife and I went to Sri Lanka. Had it not been for Sri Lankan Airlines who offered a free 3 night package en route to any destination as a tourism building measure during the time of the ceasefire brokered by the Norwegians between the Government and the LTTE, I probably would not have ventured to the previously conflict ridden land.

We were put up at the Galadari hotel in the heart of Colombo which was a lovely place and had all the usual facilities and tantrums of a good five star deluxe business hotel.

The Location: MGM Casino on Galle road…the place where we were spending the evening. A medium sized but plush place with no relation to its namesake in the US but with a good collection of gamblers.

As a rule, if we go to a gambling destination we put aside US$ 100 a piece to try our luck and spend a fun evening with top quality liquor and food that is usually included and encouraged if you are on the betting tables.

The wife, being the sensible one, pocketed her 100 dollars for shopping and I proceeded to encash mine for about 10000 Srilankan Rupees and felt pretty flush while parking myself on the roulette table with the round casino coupons of Rs. 100 each.

A Japanese senior, A Scandinavian woman, Lady Luck, the two of us on one side of the table and three portly East Asian guys on the other. We were the lambs of this table with the betting getting pretty high. But, Lady Luck was on our side and in about 20 minutes and 2 whiskeys down we were up to about Rs.150000. What ever we bet just kept going our way.

Just then an elderly Sri Lankan woman, very well dressed and dripping with diamonds and maybe close to seventy, joined our table right next to us. The wife at this point suggested we make an exit and cash our booty. My reaction: “One more Glenfiddich and Grey Goose and we’ll leave”…

The Sri Lankan lady was pretty friendly. She kept making witty jokes and just diverting our attention from the table. Somehow she was so smooth that unwittingly our bets just started getting bigger and more reckless. She just kept chatting softly about her experience at the tables and how her system worked for her most of the time… and we just kept betting.

She excused herself about half an hour later to go to the washroom and that was the last we saw of her and our money. We had lost all but Rs.2500 during our interaction with her and her stories.

The wife, now adamant, made me get up as we finished our drinks and food that they had generously served us and got our balance encashed. The smart wife then came out with the initial Rs.10000 that she had unknowing to me taken off the table and kept aside in her bag following her gut feel.

On our way back to in the hotel car that we had hired the driver asked if we had been lucky that night. And I told him about the happenings of the night describing the Sri Lankan lady and how we felt that she was somehow mixed up.

He just smiled and said.. “She owns the place…Didn’t she tell you that?” “Sri Lankan residents are not allowed to gamble in the casinos...”

Moral of the Story: Behind every successful man is his wife...but you have to listen to her...

Offical entry for as part of indiblogger

Tuesday, February 28, 2012


On my third trip to London and my sister's first my father thought it wise to give us a cultural tour of the city, most of it on foot though as the London Eye had not yet been built.

After the usual sights like the Tower Bridge, Houses of Parliament, Westminster Abbey and Buckingham Palace it was the turn of the Tower of London.

We took in the grounds, the white tower and saw how the old monarchy had lived and even saw two of the six resident ravens, the widely believed custodians of the British Monarchy, sipping on water in the warm August sun.

Then the piece de resistance, the crown jewels... the main reason behind spending the £18 per person ticket, to see what our history books had told us.. The Koh-i-noor. It was exciting to enter into the jewel house with the tall and emotionless beefeaters standing guard. In the vault like display room as we were being urged by the ushers to "keep moving" but as we saw it we paused just a while longer at the Koh-i-noor. The world famous diamond at 105 carats and the star of the Queens crown. We truly were in awe.

My father in a moment of proud patriotism pointed out the diamond and said in Hindi; just to be sure that he puts his true feelings across to his children without drawing stares from the rest of the tourists,.."yeh hamare desh se chura ke laye the"..(they stole this from our country) . Just at that moment one of the Yeomen Warders who was right next to us says in chaste Punjabi " Himmat hai te ley ja wapas"....(If u have the guts, try to take it back).

The three of us were so stunned that we were left open mouthed like a fish out of water. We didn't know what hit us..we were like rooted and paralyzed as my father just kept staring at the bearded elderly beefeater refusing to believe what he had just heard.

It must have been the longest 30 seconds of our the beefeater smiled and said "Been married to a Sikh for 30 years and she didn't want to learn so I had to.....keep moving"... The look on his face of having taken the mickey out of us with his wit and element of surprise made us get back to reality and smile.

This event has been the highlight of my many visits to London and made me understand the level of penetration and integration of various immigrant cultures into mainstream British Life. Even today while saying anything in Hindi or Punjabi anywhere in the world I do always look around expecting a comment from the most unexpected quarters...Once bitten..Twice Shy..

The above is an official entry for the and indiblogger contest.

Ah Paris!...Warmth in the Summer Sun…

Ah Paris! Paris is like a girlfriend you can enjoy even with your wife. It is not a city but an emotion.
It was the fourth of our seven days in Paris and after exploring the city mostly on foot both over and under the ground ( the amount you have to walk in tunnels for the metro stations) my wife refused to go out for dinner. Instead she wanted..."A McDonalds burger".. Sacrilege in the heart of the land of gastronomy!!

Being the obedient husband that I am, I went in search of the ‘Golden Arches’ from our hotel in the 8th district on Blvd Haussmann, which incidentally is the best area to stay in, unless you want to stay under the Eiffel tower in the 7th district or you are gay and like the 4th district or the 18th district if you are an artist.
Le Consulat at Montmarte 18th district...Creative Heaven

Like all good Indians I carried a bottle of vodka spiked sprite for the journey as it was about 10 pm ( time for my drink) and yet the sun was still very bright. The McD was like a 10 minute walk and just as I reached, there was a sort of small commotion outside which I just tried to side step as a good tourist should. I couldn't help seeing that the staff was shooing away a young girl who was picking up left over food from tables. In my mind I mocked the claims of a first world country taking care of the hungry and homeless.

Just as I walked out I saw the same girl sitting on the pavement sobbing softly. She looked just like the Afghan girl on the National Geographic cover a few years ago.. The same haunting eyes.. She was probably Algerian I thought because she spoke French and there were a lot of them around the city. In a moment of pure reflex action probably spurred by the vodka in me, I handed over the bag of food to her saying “ce fut pour ma femme, mais vous en avez besoin plus” or "this was for my wife but you need it more" in French ... And I turned back and re ordered from McD.

She was nowhere to be seen when I walked back and that was the end of it for me. I never mentioned it to my wife I really don't know why, but I didn't really think about it too.

We went about exploring Paris for the next two days taking full advantage of our research and absorbing in most of the museums (at half price of course.. we planned well!!), the lovely gardens and barely using our carnet of 10 metro tickets as the city is soo beautiful that it needs to be seen on foot. Also by virtue of being close to most attractions intentionally we chose to walk over horribly over priced taxis and metro tunnel mazes.

On the last day before we left we went for a walk along the banks of the Seine. Every year from the 21st of July to the 21st of August the banks are transformed into an artificial beach with huge amounts of sand ,beach umbrellas and loungers. It feels that you are really at a seaside resort and oblivious to the busy city just 10 feet above you.

As we were strolling along the girl with the ghost eyes appears again out of nowhere with a small bunch of wild flowers and hands it to my wife saying “je vous remercie et je vous bénis” or "thank you and bless you".. By the time we realized and reacted she just disappeared in the crowd..

My wife looked at me quizzically and the smile in my heart came to my lips..."I think the Parisians really do like you.." I said and just attributed it to maybe a case of mistaken identity.

In all these years since we have been to Paris what I saw was the usual Champs Elysées, Notre Dame, The Louvre, Latin quarter, Gallerie Lafayette, Opera, Eiffel tower etc. but what I experienced was going to stay with me forever.....until made me come out with it through indiblogger..

Wednesday, September 14, 2011

The Last Day

“Do you think Chris will make it?” asked Dr Anand.

“I doubt it very much, he has gone too far already” said Dr Rao.

“Does his family know? Are they going to be there?” Asked Dr Anand.

“I think they have a fair idea that he is going but, I don't think they can be there for him..sad isn't it?” said Dr Rao.

Dr Anand fiddled with his fingers nervously. He was young, only thirty two big built with a forty inch chest and hands of an artist but was a bit slow in the head to be the best.
Dr Rao was his guru..his idol. Dr Rao had taken upon him the task of polishing the rough diamond as he called Anand into the brilliant stone he could become. His talent was unquestionable unlike his intellect and Rao thought he could correct that.

“How much time does he have?” Asked Dr Anand.

“Not too much, I am afraid, things will have to move real fast and he really shouldn't be going like this.. ” said Dr Rao.

“You are sure it's terminal?” said Dr Anand.

“Of course I am.”

“How can you be so sure?” asked Dr Anand.

“I read what's on the board very carefully. It clearly says terminal” said Dr Rao.

“2 or 3 Sir?”

“It's 3 and I'm positive” said Dr Rao.

“So when do you think we should tell him?” asked Dr Anand.

“I think about 6.30.”

“Isn't that too early? Let's give him some more time” said Dr Anand.

“We have to be careful that it doesn't get too late...”

“Do you think Australia would have been better?” asked Dr Anand.

“Maybe, but Singapore isn't too bad either for such serious stuff ”  said Dr Rao

So What do you think?? Will Chris get back in time from Agra to catch his Delhi Singapore non stop flight at 9 from Terminal 3 to Singapore to study at University there ??

The mind does play tricks….what you read does not necessarily mean the same as what you think…