There is a common saying, “Nothing is certain in this world except death and taxes.” But this saying is applicable to the 2.24 crore Indians who pay Income tax. The rest hide behind the tree, trying to hide their income, get exemptions etc.

Just imagine, even if you are not a tax payer, what would happen if the govt. abolished income tax (Direct tax) altogether? You won’t be required to pay any income tax, nor file any I-T returns or worry about the compliances of Income Tax Department.

Some industry experts are in favour of abolishing income tax largely because of its failure to bring taxable citizens under its bracket. So, no tax means more money to individuals. After PM Modi’s demonetization, abolishing of income tax was seeming to be highly the next economic reform that the govt. would roll out.

Why should the income tax be abolished?

  • It encourages illegal behaviour, citizens trying ways to hide income.
  • Indirect taxes such as GST are fairer and more transparent.
  • Income tax benefits never go to the taxpayers.
  • GST is an empowering tax.
  • Encourages citizens to believe in the tax system.

For an aam aadmi, income tax is the only thing that he plans to avoid and there are no reasons political parties will try to make use of the opportunity to fool public. It is largely the middle-class citizen who is at stake here. The poor don’t pay any income tax, the rich don’t mind paying. The middle class is crushed out of nowhere.

So, non-corporate income tax is earned from two basic sources – individuals and business. If income tax is abolished for individuals it won’t affect the tax revenues of the govt. but if business income is exempted, which is the real sector creating jobs through self-employment, it will affect the tax revenues of the govt. majorly.

According to Member of Parliament, Dr Subramanian Swamy, “One important way to put the economy on a double-digit growth would be to raise savings and abolish income tax. The rate of savings goes up, growth goes up. Therefore, indirect taxes will give you more than you lose by abolishing it.”

Some industry experts feel that abolishing income tax would be a bad idea. They say that the consequential shortfall in income tax revenue would be met through other sources like GST. They even say that it is not feasible to abolish income tax completely but aim at lowering the tax rates and simplify the compliances. Abolishing would further widen the already income disparity. Moreover, once abolished would be difficult and uncertain to reintroduce.

Abolish or not, depends on the govt. but the most important thing that needs to be taken care of is to ease and improve compliance, make the process taxpayer friendly and bring more citizens under the tax bracket.

This is just the overview, if studied in detail, there are many things to consider.