Tuesday, April 03, 2007

One good print deserves another

(Reprint of my column in yesterday's Businessline. Not too bad really.)

No Tax Please, We are Indian

Today we are going to talk about something rather humourless. Something that is inevitable. Yet agonizing. It is a phenomenon that rears it head once every month in a minor way and then wreaks complete havoc just before the onset of summer every year.

You are absolutely right I am talking about virulent Dhobi’s Itch!

Ha ha! I jest.

No instead we are going to talk about the cruel phenomenon that is, shudder, Income Tax.

Now most of you new managers should be making a tidy little packet every month as salary. The job market is booming. So I assume most of you are cashing into the opportunity big time.

But even if you don’t, it’s ok. Don’t worry. Keep your focus, stay dedicated, and work long and hard hours. Your reward will come. One day, late into the night, your boss will depart early leaving you in the office alone with the fax machines, servers and other expensive office automation equipment.

There is a thriving black market for these items. If you have a large enough office you can even rent the place out for marriages, book launches and such.

But whatever your source of your income the reality remains: You need to pay your taxes.

Today we will talk a little about Income Tax and demystify the phenomenon. After all, financial rationale apart, you are a responsible citizen and must pay your fair share of the tax burden as well: between 20 and 30 rupees, every two or three years.

But before we jump into the complicated machinations of tax management we must get our fundas on Income Tax in place. Where did the tradition of Income Tax begin? How did it begin? Who established the first tax system? WHY IN GOD'S NAME WOULD HE DO SUCH A THING??!!

Income Tax was first established way back in the year 10 A.D., a year renowned for its sharp winters, remarkable Chardonnay and astounding ease of representation in Roman Numerals. For the first time ever an unprecedented tax of 10% of profit was levied by the Emperor Wang Mang (real name, possibly sad childhood) on Chinese professionals and skilled labour.

(Just two days later, on a Wednesday, the concept of “Consultant”, “Expense Account” and "Section 80C" was also invented by the compulsively innovative Chinese.)

And, as a harbinger of things to come, the Chinese promptly packaged Income Tax with a manual in lousy English, wrapped it all up in bubble wrap and exported the idea all round the world at abysmally low prices.

Governments around the globe were ecstatic:

King: What the…??!! We just decide on a percentage and the citizenry coughs it up… no questions asked?
Minister of the Exchequer: Of course they can dispute it…
King: But then we could behead them or something…
Minister: I was thinking more of a stint in the dungeons. But hey whatever works for you man…
King: So be it. Declare a 30% flat rate and a 2% education cess
Minister: Yipee

Soon nations around the world rapidly caught up with the Chinese and began to tax their citizens. Of course in return they offered them services like Social Security, Armed Forces, A Vast and Inefficient Government Machinery and, most importantly, Public Sector Undertakings that gave astounding market share and ever increasing profits to private sector competition.

Independent India also realized the need to tax its citizens in order to fuel the fledgling nation’s rapid growth. So, shortly after independence (around 4 p.m.), our founding fathers sat around to decide on a taxation system. They mutually agreed to devise a fair and balanced tax system that would also ensure efficient tax utilization.

Then after a hearty laugh they quickly decided on the cruel and crippling tax regime we have today.

Now some might feel like questioning the right of our government to tax its citizens.

I would not recommend this line of thought.

The more knowledgeable among us know that the Central Board of Revenue has powers conferred by section 295 of the Income-tax Act, 1961 (43 of 1961), and rule 15 of Part A, rule 11 of Part B and rule 9 of Part C of the Fourth Schedule to that Act that allows it to tax anybody, anywhere at any time of the day including bank holidays. Any dissent is punishable by a fine equivalent to three time your net worth AND/OR forced reading of the ENTIRE Income Tax Act of 1961 including ALL annexures, maps, diagrams and companion multimedia DVDs.

So really you have no option but to pay your taxes. If you know what’s good for you.

However the government does allow you to plan out your income and use of money in such a way that your tax liability is brought down to an absolute minimum. Let us see how we can plan our Income Tax in the most optimal format.

Now by income the government means any money you make from anywhere: salary, house property, business, capital gains, other sources, selling of employer’s assets, supari projects undertaken on alternate weekends for friends in Mumbai underworld to make ends what with all this rising cost of living and all... etc.

Now you don’t need to pay any tax as long as your income is below a certain minimum amount. But subsequent to this Rs. 75 you have to pay tax on a slab-wise system.

Then of course there is the deduction up to Rs. One Lakh. This can be in a variety of savings instruments, insurance policies, loan repayments etc.

You also get rebates on housing loans and a little extra benefit if you are female or an elderly citizen.

So the first strategy is to prove to the government that even though you are a management trainee fresh out of business school you are, in reality, a 70 year old woman who is simultaneously buying several homes in Nariman Point and Chanakyapuri.

That should take care of most of your problems. The next step is to have an open and frank tete-a-tete with the finance/payroll guys in your company. With some persuasion they will understand that while you may be receiving your salary every month in the bank there is NO reason why you should be receiving YOUR EXACT payslip. Nor must they use your exact PAN number.

The finance/payroll guys normally see your side of the argument but get them to do all the paperwork before they have had one too many Margheritas.

So there. That was a nice little overview of the Income Tax system was it not? I hope you put it to good use and quickly become a master of your own tax liability.

Or move to Dubai.

13 comments:

Thisisme said...

hmmm...so now i knw wat to do to avoid tax :P:P

J. Alfred Prufrock said...

Effin' brilliance, mon. Applause.

J.A.P.

Shaan said...

hilarious as always :D

hehe i liked the chinese packagin bit :D

fantams said...

was expecting some serious advice there...shd have known better eh? :)

silverine said...

"One good print deserves another" I agree, absolutely hilarious!

Random Reflections said...

Emperor Wang Mang? For real?

At least, you don't live in America and the Indian government didn't just lose $8.8 billion in bricks of cash in the Iraq reconstruction effort!

Deepak Panigrahy said...

was expecting some tax saving and investment ways...neways interesting read..

ശ്രീജിത്ത്‌ കെ said...

Boy, wasn't that funny. He he.

Scout said...

i have to admit, this was the funniest, most sarcastic treasie yet on IT. but SOME of us do pay the infernal taxes

tapish said...

People seem to like 'travails', but this one was the wittiest!

Gulam Hasan said...

Hilarious dude!. Somehow i missed the sid says coloumn this week(I kn am a terrible mannager) but you posted it here so yippeee..

Automotivix said...

Brillian Insight into Indo-Chinese taxation. What more can you expect from the two oldest civilizations ? :-))

ashwin sundar said...

Man awesome!!No wonder all mallus movin to dubai!!