WEEKLY FINANCIAL SNIPPETS – 24/12/2016

1. LESS TAX FOR SMALL TRADERS ON DIGITAL TRANSACTIONS: With a drive to move the cashless economy in the country, the government has said that small traders and businesses with a turnover of up to 2 crores will pay less tax if they accept payments through banking and digital modes. Presently as per Income Tax Act, 1961 small business with a turnover of up to 2 crores or less, the profit is deemed to be 8% of the turnover for taxation.

2. PRADHAN MANTRI GARIB KALYAN YOJANA (PMGKY): PMGKY is a tax disclosure scheme

floated by the government from December 17 and will be open till 31st March 2017. The new disclosure scheme comes with 50% tax including penalty. Further, declarations under the said scheme will be kept confidential and information will not be used for prosecution.

3. BANKS SET TO LIMIT ELECTRONIC FUND TRANSFER CHARGES: In another measure to boost

cashless economy, the government has directed all state run banks not to charge fees for transactions settled on Immediate Payment Service ( IMPS) and Unified Payment Interface ( UPI) in excess of that levied for National Electronic Funds Transfer (NEFT) of over Rs 1,000/-. RBI has also directed banks not to charge for debit card transactions up to Rs 2,000/- . Both these directions will be in force till 31/03/2017.

4. BETTER IDEA FOR ELIMINATION OF BLACK MONEY: According to Mr Kaushik Ghosh,

professor of Economics and ex-chief Economist -World Bank, Demonetization mostly hurts people who are not government’s intended targets and it only dents the corruption temporarily. But if the idea is to fully eliminate black money forever, then abolishing personal income tax is a better idea. Further elaborating his point of view he says that only 2 to 3 % of Indians are paying income tax and around 5% of Indians file tax returns. When there is no income tax deduction, people will have more spending power. And when there is no income tax to be paid people will freely declare their income. People will freely unlock their unproductive assets such as gold and real estate and convert to those instruments that generate annual return. This will lower our import bill and strengthen the rupee. Bank deposit will shoot up, bringing down interest rates. And then there is cost of compliance. Tax payer wastes his otherwise productive hours each year assembling supporting documents, meeting accountants, and devising ingenious ways of paying the tax. Since there is no tax, rich will not venture their funds to tax heaven countries and will keep the funds here in India which they will use for more productive purpose thereby paving way for economic growth. The government would lose an important source but this can be covered by plenty of other means. Finally eliminating Income tax would shut the sprawling I-T Department and its vast bureaucracy and the present income Tax work force can be utilised by the government for other productive purpose.