ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

Articles by A Das-GuptaSubscribe to A Das-Gupta

Personal Taxation and Private Financial Savings in India

This paper examines rates of return to Indian private financial savings instruments after personal taxation. A sample of about 30 assets is considered, including the most popular savings instruments. It is found that the ranking of assets after income taxes differs across tax brackets, which implies a distortionary tax system. Further- more, tax deductions favour upper bracket taxpayers the most, so much so that tax incentives for savings may end up discouraging saving in higher brackets due to excessive subsidies. It is also shown that the term structure of interest rates displays only a weakly increasing pattern as the holding period increases. The treatment of assets under current tax practice is also compared to proportional expenditure taxes using the Index of Fiscal Privilege Budgetary implications of tax concessions are analysed and found, in many cases, to be a cause for concern. Some comments on the implications of these findings for investment bnd government debt are also made.

Principles for Random Scrutiny of Income Tax Returns

In the Long-Term Fiscal Policy and the discussion paper on Rationalisation and Simplification of Direct Tax LawS, the finance ministry has expressed the intention of providing for random scrutiny of a sample of income tax returns. White, in the interests of cost effectiveness, acceptance of the principle of random sampling is welcome, various specific measures proposed in the two finance ministry documents are problematic. In this note an enunciation of the economic principles of random scrutiny is undertaken with special reference to the Indian income tax case. A scheme for the implementation of random scrutiny is also proposed.

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