Proposal for Raising Sec 80C Deposit Limits to raise Cheap Development Funds for the Government

The basic Recommendation is  : Raise  the present exemption limit of  Sec 80C deposits  from the current Rs. 1.50 lakhs  to  Rs. 25 lakhs  as under :

a)    Rs. 1.50 lakhs can be deposited in any of the currently available avenues like PF, PPF, LIC, FDs of 5 years tenure and longer  etc.  (i.e. no change proposed)

b)    Deposits beyond Rs.1.50 lakhs upto Rs. 25 lakhs  can only be made in PPF  under the following provisions :

1.    For deposits from Rs.1,50,001 upto Rs. 5,00,000/- the interest rate paid in PPF deposits will be  2 percentage points less than the declared PPF rate for that year (which is applicable to the deposit of the first Rs.1.50 lakhs)

2.    For deposits from Rs.5,00,001 upto Rs. 10,00,000/- the interest rate paid in PPF deposits will be  5 percentage points less than the declared PPF rate for that year (which is applicable to the deposit of first Rs.1.50 lakhs)

3.    For deposits from Rs.10,00,001 upto Rs. 25,00,000/- the interest rate paid in PPF deposits will be  NIL.

c)    As can be easily understood,  the government will get a huge cache of cheap and almost NIL cost funds for the price of foregoing some taxable income (a fair part of which it was losing anyway because people may have been avoiding declaring the same to avoid / evade  paying income tax).

d)    Even more important,  the deposit of so much money in government coffers means that development works can be tremendously speeded up without the government running up huge deficits because these funds are coming at substantially lower costs.

e)    Finally,  the mopping of so much money from individuals will have a salutary effect on inflation that is fuelled by excess of money supply in individual hands.

Simplifying the Income Tax Structure for Individuals in India

These changes are suggested in the Income Tax Act with a view to greatly simplifying the Taxation and Tax Computation Structure.  There is no recommendation here to reduce the Income Tax rate.

Apart from the simplification it will result in,  it will also mean a tremendous saving for the  Employers’ (Govt & Private Sector) and the IT Department  in the administrative costs of computing and determining Income Tax as well as  Salary Slip printing & stationery costs

My basic recommendation is this :  Scrap all Tax Free allowances  and compensate for the same by due adjustment of “initial tax exemption amount”  and “Tax Slab Adjustment”

The major Allowances that currently qualify for Tax Exemptions (under various conditions and particularly for the salaried class) are :

Sl No	Type of Allowance	Normal Amounts for which Tax Exemption Claimed Annually	Guesstimated Weighted Average of Exemption Claimed (Annually)
1.	House Rent Allowance	Rs. 60 K  to  Rs. 720K	Rs. 300 K
2.	Medical Allowance	Rs. 15 K	Rs. 15 K
3.	Leave Travel Allowance	Rs. 15 K  to  Rs. 100 K	Rs. 40 K
4.	Conveyance Allowance	Rs. 9.6 K (Rs. 800 p.m.)	Rs. 9.6 K
5.	Food / Meal Allowance	Rs. 10.5K (Rs. 875 p.m.)	Rs. 10.5 K
6.	Educ Allowance	Rs. 2.4K (for 2 children)	Rs. 2.4 K
		TOTAL WEIGHTED AVERAGE of EXEMPTION CLAIMED ANNUALLY	Rs. 377.5 K

Hence the recommendation is that if these allowances are withdrawn and cancelled for claiming tax exemption,  the tax payer must be compensated by a like amount,  which can be done by raising the present Tax Exemption Limit from Rs. 200 K  to Rs. 577.5 K.

Assuming that the guesstimated figure of Rs. 377.5 K  being claimed as exempt from Income Tax is correct,  the fact remains that this is essentially applicable for Salaried Persons.  Thus,  raising the Tax Exemption limit to the full extent of the above  “estimated Tax Exemption Loss”   will bestow an unintended tax reduction benefit  on all those who are not salaried persons.

Keeping the above in mind,  the following is recommended.

a)    Complete Withdrawal of Tax Exemptions under the above 6 heads.

b)    Compensate for the corresponding tax increase on the taxpayers as follows :

1.    Raise Minimum Tax Exemption Limit for all tax payers from the current  Rs. 250 K to Rs. 350 K (in case of Senior Citizens, raise it from Rs. 300 K to Rs. 400 K and in case of Senior Citizens above 80 years,  raise it from Rs.500 K to Rs. 600 K)

2.   Introduce, additionally, Standard Deduction @ 30 % of Gross Salary for all salaried persons subject to a  maximum of Rs. 100K

3.    Raise the Income Slabs for 10 % and 20 % Income tax Rates as under :

i)   Change 10 % IT Rate Slab from the current Rs. 201 K - Rs. 500 K  to  the revised Rs. 201 K - Rs. 800 K

ii)  Change 20 % IT  Rate Slab from the current Rs. 501 K - Rs. 1000 K  to  the revised  Rs. 801K - Rs. 1500K

The rationale behind the above recommendations is as under :

     a)    Compensate the tax payer for the withdrawal of various tax free allowances by raising the minimum tax exemption limit ;  in doing so, it is true that some people who are not salaried persons will get a “bonanza’ because of the raising of this tax limit.  

     b)    To restrict such ‘bonanza”  the minimum tax exemption limit raise has been restricted to Rs. 100 K only.

     c)    However,  to compensate the salaried tax payers who were availing this tax exemptions,  they are compensated by giving them a tax relief through the “standard deduction route”  which is applicable only  to salaried employees.

    d)    Finally, the higher bracket salaried persons who are not fully compensated in the tax exemptions they used to enjoy under various allowances (which are proposed to be withdrawn now),  the Slabs for 10 % and 20 %  IT rates are proposed to be widened so that they get compensatory relief there.

The above is intended to be purely a revenue – neutral  but Income Tax Structure simplification measure,  which will have the following  concomitant benefits :

     1.    Tax Computation and Tax determination will become far simpler and easier.

   2. Tax Structure of various organisations (government and private) can be drastically simplified by reducing the number of heads of payment,  which were primarily introduced to take advantage of the various tax exemptions so far allowable under the Income Tax Act ; thus every salary structure can now have as much as 6 fewer  “heads of payment”  viz., HRA, Medical, LTA, Conveyance Allowance, Food Allowance and Education Allowance,  since having these heads will no longer reap any tax benefits.

   3.  This also means that people will not have to fudge and manufacture documents for claiming tax benefits,  particularly for the heads related to  HRA,  LTA  and  Medical.  To that extent,  the IT department does not have to spend time and energy in “verifying”  that such claims are genuine or not,  which will mean a tremendous saving in administrative time spent and costs incurred for such  work in the IT Department.

The figures mentioned above are purely based on the undersigned’s best estimates and are certainly not claimed to be accurate.  It is recommended that,  based on the information available with the IT department and the government,  these figures may be fine-tuned and the various figures adjusted to result in a revenue- neutral,   re-alignment of the Income Tax Structure.

Thereafter,  if the government wishes to give some tax relief to the tax payer, it may do so in addition to what is recommended above.

This is also in consonance with the spirit of the  Direct Tax Code (DTC),  that is built on the very sensible premise of scrapping all exemptions and compensating for the resultant “increased tax liability”  by a suitable tweaking of tax rates, tax slabs and minimum tax exemption limits.

How does an Organisation become Professional ?

An Organisation becomes Professional by

Ÿ  having Objectives that are

• clear
• durable
• communicated (throughout the organisation)
• adhered to
• modified and updated (whenever changing circumstances so dictate)

• having a  Structured Planning Process for achieving the Objectives (just achieving good results,  without a structured planning process,  is a matter of luck and can neither be counted upon nor any credit claimed for it, nor is it self-sustaining in the long run).

• having defined processes for executing the Plan with full and enthusiastic participation of the entire team.

• achieving its planned objectives regularly.

• having a  clear and sincere customer – focus.

•  treating all its employees fairly and with genuine care and compassion.

• treating all its suppliers fairly and respectfully (particularly in matters of timely and full due payment) and according them the status of business partners.

• treating all its shareholders (irrespective of size of holding) with equal care, attention & respect and disclosing fully, fairly and transparently, all information about the company’s activities, future prospects and risks,  to enable them take an informed judgement on their investment.

• being compliant with all laws, rules and regulations,  of the government and statutory bodies,  that are in force and apply to it.

• going beyond just compliance to being ethical in all its inter-actions with all its stake-holders

•  being sensitive to & respectful of Environmental, Safety, Statutory and Social  concerns & obligations.

• being conscious of and discharging, on its own initiative, obligations to the people living in proximity to its geographical locations, over and above what is called for by law,  in terms of providing or maintaining facilities that are of common and general public benefit – e.g. roads, schools, gardens/parks, rain water harvesting, public health/hygiene  and similar.

• continually benchmarking itself against best performance parameters,  internationally,  and striving to attain & surpass them.

     

     Mumbai

    June 10,  2004

What is Professionalism in an Employee ?

Professionalism in an employee means

Knowing one’s job and responsibility, fully and completely.   If not clear,  then seeking clarification from one’s superiors.

Learning, developing and practicing,  the best way of carrying out the assigned tasks - keeping in mind the quality, cost, delivery, legal, ethical,  environmental, and social  impact aspects and costs. 

How is this to be done ? 

·  Learning from books, manuals, training programmes,  other experienced people and from one’s own mistakes.

·        Making realistic but challenging commitments, particularly on time aspect.

·        Once a commitment is made,  moving heaven and earth to meet the same.  The 9 to 5 concept is no longer valid.  It has been replaced by the  A to Z  work style i.e. complete the entire job from A to Z before you leave.  Today’s work has to be done today  --  not carried forward to tomorrow.

·        Keeping your boss/superior fully and regularly informed of the progress you are making,  from time to time.  In case there is likely to be any delay from the  previous commitment or any shortfall from the committed quantity,  immediately informing your superior.  This will give him time to take any corrective action or get the job done by bringing in additional resources or from some alternative source. 

·    Nobody likes surprises,  especially surprises about slippages or failures. Hence always communicate,  regularly about your work with the concerned departments /sections  as well as your boss.

·    Treating your internal customer with the same respect and care as for an external customer  --  this will bring dramatic results and greatly improve team-work.

The above, in turn,  requires that the employee :

a)   reports in time for work.

b)   follows the discipline of the organisation.

c) behaves / inter-acts politely and pleasantly  with his/her colleagues, superiors, customers and all other persons that he/she comes in contact with,  in the course of his/her work.

d)   does not idle his/her time during working hours.

e)   keeps his/her workplace neat , clean and well-organised,  such that even in his/her absence,  colleagues can locate and access official working papers/documents/files without any difficulty.

f)     fills all forms and makes all reports, as required, regularly and in time.

g)   respects and adheres to all company and (geographic) location protocol and culture

h) respects and follows, diligently,  all safety and security practices and protocol.

 

Who is a Professional Manager ?

A professional manager is one

who is guided in his work & action by a set of core principles that are internally consistent and  non - violative  of  statutory and legal provisions.

who is consistent in the yardstick he applies for dealing with people and situations.

who has a  “broad  framework”  for analysing,  judging,  decision-making and taking  actions,   i.e.  one who is not arbitrary and  “seasonal”  in the practice of management.

who,  in addition to complying with legal and statutory provisions,  also has a set of ethical  and moral principles that he follows,   which are  “fair”  to those affected by his  decision-making and action.

who is willing to stand up for what he considers  right / correct   &  is not afraid to express an  “unpopular”  view point  nor  afraid to voice an opinion that doesn’t  agree with that of his boss.

who,  on a matter of principle,  is willing to quit rather than  “submit”  or  “go along”  with what he considers wrong or unethical or immoral or illegal.

who,  while being steadfast in sticking to his principles is,  himself,  always open to criticism,  and willing to change his ways when he discovers that they are wrong or outdated.

who,  on his own initiative,  seeks to enlarge his own body of knowledge or enrich his fund of experience through honestly acknowledged learning from others  ---  be they his superiors,  peers,  subordinates or professional colleagues.

who has the vision to see,  beyond his own job or company,  to the larger  interest / requirements / good   of his immediate community and society at large.

Ranchi

October  30,  1995

Who is a Professional ?

A Professional is one who

Has Knowledge about his profession or responsibility   i.e. he has specific and specialist knowledge about his job which comes from specific training and experience in that field,  e.g.  engineer, doctor, chartered accountant,  tailor,  sculptor  etc.

Has a definite and standard method of carrying out his work ;  in cases of deviation, has, again a set of standard responses for meeting the deviations or unexpected changes.  e.g.  doctor,  car mechanic,  electrician

But, in today’s  competitive world,  the word professional or professionalism has acquired a much bigger meaning.  It includes

·        Following a code of conduct appropriate to the profession you are practising  e.g.  doctor – patient relationship,  lawyer – patient relationship,   tailor,  actor.

·        Acting on a set of codified rules,  practices,  behaviours that have evolved through specialist knowledge and years of experience,  as opposed to an amateur or fresher.

·  Working in a planned manner,  taking into account various likely difficulties, obstacles and being prepared for the same.

·     Adhering to commitments – quality,  cost and time e.g. courier service,  laundry,  management report etc.

·    Keeping the customer or  “other person” regularly informed of progress in your work, delays if any, changes in milestones & corrective actions being taken

·        Accepting responsibility for commitments made and bearing loss,  if any,  resulting to you for extra work done to meet commitment.

·        Respect for the customer and/or the person you are dealing with.

 

A Citizen's Appeal to the Doyens of Indian Industry & Business

The severe drought that the country is facing has brought untold miserly to crores of people in the affected areas.

While the government must act and is so doing in many cases,  the magnitude of the drought is so huge that government intervention is simply not enough.  The more fortunate amongst us owe it to the country and the suffering people of   Marathwada,  Beed, Vidarbha, Latur, Gujarat, Rajasthan, Bundelkkhand, Chattisgarh, Andhra Pradesh, Telengana, Jharkhand & Orissa to extend assistance on a war footing to see that this situation does not repeat next year.

While relief and other amelioration measures are being taken by the Government,  I appeal to the doyens of our industry to take the lead and undertake digging out of large water catchment ponds to be able to catch the rains when they arrive in another 6 to 8 weeks time. 

What is required for this is the deployment of a large number of  Heavy Duty  mechanized excavators so that we can dig out  a minimum of  10  "water catchment ponds"  having capacity to store at least 100,000 litres of water each in each of 10 affected areas listed above.  this means we will be creating water holding capacity of a minimum of  1 lakh litres of water in each of the above areas which will be a good back up for the local population for the coming months.

Hopefully with a good monsoon (as has been predicted by the Met)  some of the store water may also seep into adjoining areas and generally raise the water table.

This is a very simple action - no high technology or complicated process in involved. It requires only money to deploy the excavators.  The cost that the industry will incur for such an effort is a drop in the ocean compared to the tremendous goodwill that their actions will generate as well as the huge “physical saving of lives” they will bring about by their this single action.  This can even be treated as part of industry's CSR activity.

I appeal to our stalwart industrialists like  

M/s. Ratan Tata, Cyrus Mistry, Kumarmangalam Birla, B. K.Birla, Deepak Parekh, Rahul Bajaj, Mukesh Ambani, Anil Ambani, Azim Premji, Pallonji Mistry, Naveen Jindal, Sajjan Jindal, Pankaj Munjal, Adi Godrej, Nadi Godrej, AjayPiramal, Dilip Piramal, Anil Agarwal, Biki Oberoi, Cyrus Poonawalla, Deshbandhu Gupta, Dilip Shanghvi, Gautam Adani, Dr. Pratap Reddy, G. M. Rao, Karsanbhai Patel, Kiran Shaw, Kushal Pal Singh, Mallika Srinivasan, Malvinder Singh, Narayan Murthy, Nandan Nilekani, Narendra Patni, Naresh Goyal, Nusli Wadia, Priya Paul, Rajan Raheja, Sunil Mittal, Ramesh Agarwal, Raunaq Singh, Ravi and Shashi Ruia, Ronnie Screwvala, Rakesh Jhunjhunwalla, Shiv Nadar, Shobhana Bhartia, Subhash Chandra Goyal, Uday Kotak, Venugopal Dhoot, Yogesh Deveshwar, Yusuf Hamied, A. M. Naik  as well as all others

to please contribute to this effort which is crying need for the nation today and help our unfortunate citizens in the above areas who have been hit by drought for the 3rd year running.

This is one thing that the industry can do speedily and efficiently with dramatic and immediate benefits to all populace in the drought affected areas.

With a lot of hope and expectation.

An ordinary citizen

Teaching of Third Language in Schools

As part of the government’s policy in education, children have to study a third language between Class V and Class VIII, other than English and their mother-tongue. In probably 99% of the cases, this is considered a wearisome burden by the children and, especially, by their parents. The children are constantly consoled by their parents that they must somehow try to get through this paper by learning whatever they are taught by heart -  “It is not necessary for you to understand ; just learn enough so that you can pass!”

It can well be imagined that under such advice given by their own parents, what will be the level of interest that the children will be taking in this third language, which, presumably, is being taught to promote national integration.

Of course, any additional subject to learn is a burden. However, this burden can be made light and enjoyable, if approached in one way ; irksome and detestable, if handled in another. Let us examine as to what is happening which creates this distinct animus towards the third language being taught in schools.

The entire teaching curriculum in the school for the third language is based on transferring reading and writing skills to the students. It is this which is the burdensome and irksome part, because not only has the student to get familiar with a script that may well be different from his own mother-tongue, he has to make a physical effort in writing as well as remembering all kinds of silly passages of stories and about events that are unrelated to his daily life. Further, since he very well knows that he is not expected to master this language – his parents are not going to say anything if he does badly in  this subject  - - and, that, in any case, he has to stop learning it after 3 to 4 years, the student does not make any effort to apply himself to learn the language.

The fundamental problem here is that “learning the language” has been given to mean only reading and writing. It appears to me that the essence of learning of a language has been missed out, which is, the ability to understand the language and speak it.

Teachers and parents know only too well, how quickly the children learn to speak a new language if only they have friends and neighbours who speak the same. Perhaps, if the school authorities were to shift their focus in teaching a new language from imparting reading and writing skills, which the students find a burden,  to imparting a speaking and understanding ability,  they will kill two birds with one stone.

The whole exercise would become far more enjoyable and light for the student. They need, perhaps, have no text books nor any exercise book. Every class they should only be asked to engage in conversation in the new language. At last, now, they would learn something from these classes which would be positive and tangible. This, in turn, would go a long way in meeting the stated aim of achieving national integration, because the students would be actually speaking and understanding a new tongue which would aid in communicating with people from a different part of the country.

It is, therefore, suggested that there should be an immediate shift of focus from teaching reading and writing skills in the third language to ONLY imparting a speaking and understanding ability. Some may argue that learning a language does not only mean speaking.  “What is the use of knowing a language without being able to read and write it ?” may well be the skeptics learned query.

This is a silly argument. It is silly because today, in the name of teaching how to read and write in the third language, you are not only failing to do that, you are also making a mockery of any speaking/understanding ability ; as a result, at the end of the 3 / 4  years of “the third language teaching period”, the student merely heaves a sigh of relief and promptly forgets all that the has been ‘apparently’ taught.

In any case, nobody expects nor is it the aim of this 3 language policy to make students experts in the third language ;  the main objective has been to achieve national integration by improving the ability to understand and communicate with each other in our multi-lingual society by acquiring some grasp of a tongue other than one’s own.

If the latter be the case, then the ability to speak (and understand) the language achieves the same purpose to a far greater degree, irrespective of whether the person knows how to read and write it. Further, since oral learning, without any burden of reading or writing work will be far more acceptable to the student, there is a much greater chance that effective learning of at least the spoken language will, indeed, take place

December 7, 1990

Bombay