Wednesday, February 04, 2004

Laws of India can sometimes be, no - they actually are, very complex. The present system makes us break laws while doing, what we think, are mundane activities. Let us see with two example issues how a normal Indian citizen is made to break laws.

Everyone of us is aware of the fact that, money not accounted for is termed as black money. We will see how this is violated by an average Indian. Take the example of a petrol bunk. Do you know how much a litre of Petrol or Diesel costs? I mean, the exact price. The cost varies throughout India and let us assume for an average, Rs. 28.36 and Rs. 19.83 per litre respectively. You are made to pay 29.50 and 20.00
respectively per litre. Now, this rounding off results in a huge amount of black money generation. Lets put an approximate simple calculation. Say a bunk sells 5,000 litres of petrol and 10,000 litres of diesel everyday. The money generated thats unaccounted for per day would be Rs 2,400 (0.14 x 5,000 + 0.17 x 10,000) per bunk. Suppose there are 5,000 bunks in India, it would be Rs. 1,20,00,000 per day and per year, it would be a mind boggling Rs. 438,00,00,000 - thats four hundred thirty-eight crores and this just a rough estimate! (I am sure the actuals will definitely be more than the figure quoted here) Imagine what this kind of money can do.

Now, it doesn't stop with petrol bunks. When you make calls from an STD booth or when you buy medicines, you are made to round off the prices. Have you ever wondered why this happens and why this should continue to happen?

"There's no way to rule innocent men. The only power any Government has, is to crack down on criminals. Well, when there aren't enough criminals, one makes them. One declares so many things to be crime that it becomes impossible for men to live without breaking laws. ...just pass the kind of laws that can neither be observed nor enforced nor objectively interpreted - and you create a nation of law-breakers." The antagonist in Ayn Rand's "Atlas Shrugged" remarks thus. This applies to the Indian
Government it seems. Let us see the second issue which very much reflects the above quote.

The issue concerns the sizable chunk of the Indian populace - what we call the salaried class. The month of March can turn out to be an absolute nightmare for them. The main reasons for this are, one, the Finance Minister presenting the Budget with usual price rises etc and two, the TDS (tax deduction at source) done by the employer, resulting in usually most of the month's salary going as tax. You have to
understand what a salaried class citizen is made to do due to some of
the unneccessary rules involving taxes.

Two allowances that most private companies give for their employees are HRA (House Rent Allowance) and Medical Allowances. The Medical Allowances are generally from Rs.1,000 to Rs. 2,000 for one getting a salary of Rs. 10,000 to Rs. 20,000. That makes it approximately 10% of one's pay. An average human being isn't expected to spend that much money per month towards medical expenses. Why then is this ridiculous allowance? The company gives so much because anyone can produce fake medical bills and claim it under the allowance. One excuse given is, it
is spent on dependent parents. But then, its just an odd case. Coming to
HRA, its again a huge percentage of salary, usually 20-25% of it. Here
again, the IT rules are complex. Without going into the complete rules
fully, what it actually does is, it compares 3 different criteria and
takes into account the least one of those. What most folks are advised
by the company to do (indirectly ofcourse) is to get a rent receipt for
such and such months that will amount to slightly near the least of the
criteria above mentioned. Other allowances like petrol allowance, telephone allowance, vehicle allowance etc are just equally as misused as the above.

The solutions for the above issues? Ofcourse very simple. Round off any commodity or service being offered to the nearest 25 or 50 paise. Make the tax rules simple without any clauses. Say for example, it can be made a flat 5% till Rs. 2,00,000 and 10% over Rs. 2,00,000 of the gross salary earned. Will the Government of India oblige?