Abolition of income tax will increase transparency

This is a comment taken from the post Go ahead Mr Modi: Here's the case for abolishing income tax . It has been edited for grammar.

By Harkol

The BJP should commit clearly how they will go about tax reforms, because vague promises are easy to break.

[caption id=“attachment_1321757” align=“alignleft” width=“380”]  Narendra Modi. Agencies.[/caption]

But abolition of I-T is a good idea, if revenue deficits can be made up elsewhere. If there is no income-tax to be paid, and if BJP can ban currency notes above Rs 100, then black money will be killed, as there will be no incentive for anyone to do transactions in black (except for corrupt folks who can’t show a source of income).

The lost amounts may be recouped by charging a very small surcharge on all bank transactions (say 0.01%). The amount of money transacted through the banking system is huge, and a small amount won’t hurt those transacting. But tax collected may make up for loss through I-T.

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Added to that will be the inconvenience of using cash (you will a need 5-inch stack of Rs 100 notes to make Rs 1 lakh. When was the last time you had to pay someone even Rs 1 lakh in cash?

So, anyone who has to do large financial transaction will avoid cash altogether. And those who have unaccounted money (builders, babus, politicians, etc) can figure out how many cars they will need to ferry the cash.

This way transparency will prevail.