TDS RATE RELIEF & THE ENGLISH PUB
Recently, the government announced that it would, as a relief to tax payers, reduce the TDS rate by 25%. That means that the tax withheld and paid into the account of the payee by the payer would be cut by a fourth. That should lead to, according to the government, more money in the hands of the payee, which would be tantamount to a government relief in times of economic emergency brought upon by the lockdown imposed due to a natural calamity like a pandemic that is raging worldwide at the moment.
The problem with this kind of thinking is that it conveniently papers over the facts that:
- at a higher tax bracket, the TDS is essentially deferred tax, which would need to be paid at the end of the financial year anyway, and must therefore, as per any prudent financial planner, kept aside and held since it is already allocated to an expense that is coming up in the very near future; and
- most people who would save anything substantial with a mere 25% cut in the TDS are in the higher tax bracket (confusingly, the "relief" is not available to employees but only consultants, professional, contractors etc.).
In short: There is no liquidity. There is no saving. And most importantly, since this is being touted as such, there is no relief. Whatsoever. To anyone. At any time. Except on paper. And that too, for a time so short as to make no sense.
Unfortunately, this government does not understand anything as complex as the above argument, and loves & prefers simple folk tales, myths, and analogies to more nuanced and professional explanations from experts. How do I know that? No, you are asking the wrong question. The right question, if you are asking this one is, "How the hell have you not figured this out by now?"
Anyway, on with the subject, let me present to you a way to look at things that the government might actually "get". Why? Because when I explained this to my 6-year-old, she got it. So, there is an off-chance that people in the PMO and Finance Ministry might too.
So, off we go:
In the UK, when you go to a pub, you have to pay for your beer and food in advance at the bar and the bartender will then get you your drink/snacks, which you eat at the bar or carry to your table (or in some pubs, is brought to you).
LET US PLAY A MENTAL GAME WITH A HYPOTHETICAL SITUATION TO UNDERSTAND THE ANALOGY.
Imagine a poor, hungry soul entering the pub and asking for food. The bartender says, "OK, I will give you food. You may take your food without paying at the counter." The poor hungry man is thrilled! He reaches for the food being offered. The bartender continues, "Of course, once you finish, you need to pay before leaving."
Would you think the bartender was doing charity or cracking a joke at the expense of a poor hungry person? If the bartender says he has provided "relief" to the hungry soul, would you correct his misimpression or laugh at how clever he was to fool the poor person? Would you tell the bartender that what he did was cruel and he could just have refused rather than play this prank? Would you tell the bartender that he cannot under any circumstances call it a "relief" or would you try and do mental callisthenics to justify why technically, the poor person could eat for free at least till the time the meal was over and so this is indeed a good deed?
Don't tell me the answers though because this mental exercise is for you.
DONE? OK. LET US SWITCH SCENARIOS TO SOMETHING CLOSER TO REALITY.
Imagine it is not a business (the pub) and an entrepreneur (the bartender) we are talking of, but a democratically elected government of the 4th largest economy of the world and its PM & FM. And it is not some vagabond off the streets who walks in asking for "relief", but millions of voters and citizens who have always led "atma-nirbhar" lives, earned their own money, paid their taxes (whether directly or indirectly), stayed within their means, and helped to run the engine of this vast economy, but are in serious trouble because of a natural calamity not of their making. Imagine you being that poor hungry person.
Now, tell me: Do you feel like laughing any more?