The Finance Minister Arun Jaitley on Tuesday, reportedly hinted at lower tax rates, both in the income tax and other taxes regime.
Despite several falls and difficulties,the government has managed brought a part of unaccounted money and wealth through the demonetisation move. The Government claims that demonetisation has resulted in higher tax revenue which will eventually cause lower tax rates in India.
The Union finance Minister further warned that the people who accumulate huge amount of unaccounted cash will have to pay “high price” for such malpractices. He further ensured the Reserve Bank of India would significantly inject currency in the next three weeks to ease cash crunch.
“The advantages are, so much money which was operating as loose cash in the system, has today come into the banking system. It has to be accounted for where taxes have not been paid, which will now be recovered. Future transaction would be substantially digital and once they are substantially digital, they would come in the tax net,” he said. “Therefore, the future taxation level would be much higher than what is currently being collected. This would also enable the government at some stage to make taxes more reasonable which will apply to both direct and indirect taxes,” he added.
As per a statement recently issued by the finance ministry, the peak rate of direct taxes (personal income tax and corporate tax) is 30 per cent plus cess and surcharge, while the indirect taxes on goods total up to 27-30 per cent including Central and state taxes.
“The banking system will have lot more cash in it and therefore, it’s ability to support economy with low cost cash, that is cash whose capital (cost) is much lesser, would be much higher. Obviously with all these advantages, the social cost also on the system will go down. Therefore, the cash used for bribery, for counterfeit currency, for terrorism, for evading taxes itself will go down,” Jaitley said.
