Do it yourself

Recently, NITI Aayog published a working paper titled “Towards India’s Tax Transformation: Decriminalization and Trust-Based Governance”. The paper is a follow up to the recent enactment of the Income Tax At 2025. It is an extremely important step for making the tax governance structure trust based. The paper seeks to provide a comprehensive and critical analysis of the criminal provisions within the Income-tax Act, 2025, mapping the present extent of criminalization, documenting omissions and modifications, and recommending a trust-based regulatory transition for India’s direct tax regime. Recognizing the evolving policy landscape which stresses ease of business, citizen-centricity, and the need to move away from “fear-based” enforcement, the paper evaluates each criminal provision through a principled criminal law-making framework rooted in jurisprudence, comparative regulatory best practices, and provides recommendations. Its central premise is that decriminalization, rationalizatio...

In the sixteen century the Catholic Church in Rome established an office of the advocatus diaboli (Devil's advocate). The job of the Davil’s advocate was to argue against the canonization of a candidate proposed by the Church. The officer would use all his might to find faults in the canonization process and evidence of miracles attributed to the candidate. It was not necessary that the officer did actually believe in his arguments against the proposed canonization. The idea, apparently, was to avoid inadvertent mistakes and make sure that no underserving candidate gets canonized. Unfortunately, in the late 20 th century, the office of advocatus diaboli has been diluted materially. I like to often play Devil’s advocate to the popular investment narratives and consensus assumptions. The idea usually is to get more clarity and minimize mistakes in the investment decision making. Continuing with the practice, I would like to question the popular market assumptions about the (a) im...

The central government presently derives 63% of its resources from taxes (Direct Taxes 36% and Indirect Taxes 27%). 27% comes from borrowing and 10% from other sources. The present socio-political milieu is such that (i) the central government is becoming increasingly dependent on the regional parties, hence it is imperative that it would need to allocate more resources to the states ruled by the supporting regional parties; (ii) a larger proportion of the population is becoming increasingly dependent on the government for the basic necessities like food, shelter, education and healthcare, requiring the basic social sector spending to rise without any major improvement in the quality of life; (iii) supply side pressures are not abetting, keeping the inflation (including imported inflation) elevated, pressurizing USDINR and yields; and (iv) economic growth continues to be disproportionately dependent on government spending (both revenue and capex). Under these circumstances, the governm...

The tax-free status of agricultural income has been a contentious issue amongst the urban middle class of India for a long time. The issue is raked up every year close to the budget presentation. It is also commonly used as an argument against farm subsidies, MSP, and other farm sector reforms. In my view, the whole debate and discussions around the taxation of agriculture income in India amongst the urban middle class is driven by misunderstanding and ignorance about agriculture economics in India. Constitutional status of the Agriculture Income It is important to understand the constitutional and legal status of the agriculture income in India, before discussing the taxation aspect. ·          Agriculture is a state subject as per the Constitution of India (Entry 46 in the State List of Schedule VII). The power to tax agriculture income vests in the respective state government. The central government cannot tax agricultural income. A few...

It is an annual ritual to seek tax relief, exemptions and incentives from the finance minister before presentation of the annual budget. The expectations of tax favors are particularly stronger in election years, as taxpayers and market participants are led by the belief that the government may be gratuitous to allure voters. There is however no empirical evidence of any correlation between the direct tax regime and government populism. The fact is that the population that is materially affected by direct tax laws is not significant to the election outcome. The recently released Direct Tax Statistics by the Central Board of Direct Taxes (CBDT) shows that income taxpayers in India may not be a group of interest from a general election view point. For example, consider the following points evident from the said statistics: No. of taxpayers: In AY23 only 8.91crore individuals paid some income tax (including TDS) in India. This is less than 10% of the total eligible voters in India. T...

Recently, the President of US, Joe Biden, laid out a framework for nearly US$1.75trn in social sector funding. The plan, inter alia, proposes a spending of $400 billion to help provide subsidized childcare for more than 6 million children and tuition-free preschool for 3- and 4-year-olds, along with $555 billion for clean energy initiatives, including $320 billion in tax credits, to help Americans pay for environment friendly home improvements and corporation’s transition to clean-energy manufacturing, over the next 10 years. The President has proposed to fund this spending through a 15% corporate minimum tax on large corporations, tax on stock buybacks and a surcharge on the top 0.02% of high earners. However, the proposal to tax the superrich (700 odd billionaires) on their unrealized gains on assets could not be pushed for lack of necessary support. Nonetheless, the proposal has reignited an intense debate, as the opinions are vertically divided on the legality and morality of ...

Some food for thought "Government is an evil; it is only the thoughtlessness and vices of men that make it a necessary evil. When all men are good and wise, government will of itself decay. —Percy Bysshe Shelley (English Poet, 1792-1822) Word for the day Stolid (adj) Not easily stirred or moved mentally; unemotional; impassive.   First thought this morning Abrogation of Article 370, a temporary and transient provision of the constitution to grant special status to the state of J&K; implementation of a uniform civil code (UCC) as mandated under directive principles of state policy outlined under Article 44 of the Constitution; and construction of a Ram Temple at Ayodhya have been three long standing promises of BJP (earlier Jan Sangh). These three promises have in fact been the major agenda items that distinguished it from other non-communist political parties in India. Freshly strengthened BJP led NDA government has ma...

Some food for thought "Our duty is to encourage every one in his struggle to live up to his own highest idea, and strive at the same time to make the ideal as near as possible to the Truth." —Swami Vivekanand (Indian Philosopher, 1863-1902) Word for the day Epiphonema (n) A sentence that is an exclamation, a general or striking comment, or a succinct summary of what has previously been said.   First thought this morning Many people have taken strong exception to the chanting of religious and other slogans associated with our independence struggle on the floor of the Parliament. They have usually been critical of BJP, enjoying a dominant majority in the lower house, for its inability to protect the secular credentials. I believe these people are living in denial. They are choosing to ignore the fact that just one month ago, these members of the Parliament have been elected by majority support using these very slogans on...