Manu Nedunkandathil, CFP
Updated: Aug 20, 2021
“He said that there was death and taxes, and taxes was worse because at least death didn’t happen to you every year.”
Taxes are a compulsory charge which one has to pay to the government on his/ her income. Most countries have a tax system. Some countries charge based on a flat percentage of the income earned or a slab based on total income earned by the person.
Taxes are a source of revenue for the government. Any government needs funds to carry out its day-to-day operations and many of its necessary functions such as providing basic and essentials services, building infrastructure, policing for ensuring law and order, etc which cannot be funded by private equity. A government carries out many activities which may not always be profit-oriented for the social good, which private businesses may not be inclined to undertake. Further, a government is mandated to ensure equal development of all sections of the society for which it may run numerous welfare schemes. Without any source of income, no government will survive and hence, one cannot just wish away taxes. If one agrees that it requires a certain amount of money to run a household, then one can imagine the amount of money it will require to run a nation.
“ Taxes, after all, are dues that we pay for the privileges of membership in an organised society.”
— Franklin D. Roosevelt
In India government collects both Indirect and Direct taxes. Indirect taxes are collected by the government from producers of goods or services, but the same is passed on to the final consumer in the form of the total price in the supply chain. Direct tax is based on an individual's income. The current tax slabs in India for the assessment year 2018-19 on personal income is as follows: -
Remember crying over having to share candy with your brother in childhood. Nobody likes a half-eaten pie. However, as a responsible and law-abiding citizen, one must pay his taxes. We as citizens must equally share the burden of nation-building. Tax avoidance is not only morally incorrect but also bad for the nation. However, having said that there is no harm in being tax efficient. The government provides us with various options to reduce our tax liability by providing deductions and exemptions under various sections of the Income Tax Act. One must educate himself or take the help of a professional to ensure tax efficiency with his income and investments. After all, a penny saved is a penny earned. As a citizen, one is duty-bound to pay taxes, but as a breadwinner of the family one has a greater responsibility towards his family to be as tax efficient as possible.
“ By law you have the right, by nature you have a duty, and to your family you have an obligation, to be a good steward of all your assets. ”
— Frank L Netti