Hello friends welcome to Sonu live ,in this article I’m going to tell you about FISCAL POLICY, TAXATION SYSTEM IN INDIA, RULES OF TAXATION, TAX PLANNING EVASION AND AVOIDANCE, BLACK MONEY, EFFECT OF BLACK MONEY.
Fiscal Policy, Taxation System, and Black Money in India: Current Landscape (Jan 2024)
Fiscal Policy:
The strategies followed by government in respect of the receipts and expenditure of government are collectively called fiscal policy . Taxes, government expenditure and public debt are the measure components of fiscal policy.
- Focus on fiscal consolidation: The government aims to gradually reduce the fiscal deficit to 4.5% of GDP by 2025-26. This involves prioritizing expenditure on critical sectors like infrastructure and social welfare while optimizing resource allocation.
- Increased emphasis on public investment: Increased infrastructure spending through schemes like National Infrastructure Pipeline is expecting to spur economic growth and create jobs.
- Focus on privatization: Strategic disinvestment of public sector enterprises is pursuing to raise resources and improve efficiency.
Taxation System:
- Direct Taxes: India follows a progressive income tax system with varying slabs and rates. Recent reforms include reducing corporate tax rates and simplifying personal income tax slabs.
- Indirect Taxes: The Goods and Services Tax (GST) has been implementing, aiming to create a unified national market and improve tax compliance. However, concerns remain regarding complexities and compliance burdens for small businesses.
- Digital taxation: Efforts are underway to tax the digital economy effectively, addressing challenges posed by cross-border transactions and internet-based businesses.
Rules of Taxation:
- Equity which means the burden of tax is more on rich or less on poor to ensure equity in society.
- Economy which means cost of tax collection should be minimum.
- Ease which means the tax system must be easy to understand and implement.
- Certainty which means that the rules and procedure under the taxation laws must be certain without any ambiguity.
Tax Planning, Evasion, and Avoidance:
- Tax planning: Using legal methods to minimize tax liability through investments, deductions, and exemptions is encouraging.
- Tax evasion: Deliberately concealing income or using illegal tactics to avoid paying taxes is a crime with harsh penalties.
- Tax avoidance: Exploiting loopholes or legal grey areas to minimize tax liability, though not illegal, can raise ethical concerns and undermine the fairness of the tax system.
Black Money:
- Black money refers to income generated through illegal activities or concealed from tax authorities.
- Estimates of black money in India vary widely. The government has taken steps to curb black money generation through demonetization, Benami Transactions (Prohibition) Act, and other measures.
- Black money has significant negative consequences. It distorts resource allocation, fuels corruption, and widens inequality.
Effects of Black Money:
- Loss of revenue for the government: This hampers investment in public services and infrastructure.
- Unfair competition for legitimate businesses: Businesses operating in the black can offer lower prices, creating an uneven playing field.
- Erosion of trust in institutions: When people perceive widespread tax evasion, it undermines confidence in the government and financial system.
- Increased inequality: Black money often concentrates wealth in the hands of a few, exacerbating social and economic disparities.
Challenges and Opportunities:
- Tackling black money requires a multi-pronged approach: It involves strengthening tax administration, improving financial transparency, and enacting stricter penalties for tax evasion.
- Leveraging technology can play a crucial role: Data analytics and digital tracking can enhance detection and enforcement efforts.
- Promoting a culture of tax compliance is essential: Public awareness campaigns and building trust in the tax system are key.
Note: This is a brief overview based on publicly available information as of January 2024. The complexities of fiscal policy, taxation, and black money in India are vast, and ongoing developments might necessitate updates. For specific guidance or in-depth analysis, seeking professional advice from a financial expert or chartered accountant is advisable.
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