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Link car, 2-wheeler sale to income to harness vehicular population and increase tax revenue

By Vanshika Garg
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Link car, 2-wheeler sale to income to harness vehicular population and increase tax revenue
Source: InSeAsia.com

Growing traffic congestion resulting in pollution mainly due to an increasing number of cars and two-wheelers all over India is a serious concern for the government.  In metropolitan cities like Delhi, Mumbai, Bengaluru the problem of congestion is at an intolerable stage and therefore the effective solution is highly required.

The number of registered vehicles in the National Capital crossed the one-crore mark more than a year ago. As per Data of the Transport Department of Delhi government total number of registered vehicles was 1,05,67,712 till May 25, 2017. Among these 31,72,842 were registered cars and 66,48,730 were two-wheelers – the major air polluters due to poor emission standards. Today, the number of cars may have crossed the figure of 35 lakh and two-wheelers 70 to 75 lakhs. Parking has become a nightmare as the car population goes unchecked. More than 16% of road space is used for car parking which is also an impediment to the growth of public transport.

The government has considered several proposals to check the congestion and pollution in the city, including hefty hike in parking fees, the introduction of congestion charges for entering specific areas, restricting entry of trucks in the city and improving the public transport system. The parking fees have already been increased in many cities. Delhi government’s odd/even scheme had some positive impact on pollution control but was not viable for long period and was rejected by the court for allegedly being biased against one type of vehicle.

However, a little has been done to curb the rapidly increasing vehicular population

Link car, 2-wheeler sale to income to harness vehicular population and increase tax revenue

The several ideas to check the vehicle growth have popped up as the experts have proposed restricting private cars, and that new registration should be done only if there is an “assured parking space” in the housing society, levying hefty road tax and cess on petrol and diesel cars. But such measures may not be able to control vehicular population growth because of people’s passion for cars like that in America.

People in metropolitan cities in India are so obsessed with the desire of having cars or even expensive luxury cars that no such measure can deter them from buying and using cars.

The cost of vehicle, fuel and taxes have gone up in last few years but still, the number of vehicles has gone up significantly. It is not that, the public transport system has not improved but still the number of cars and 2 wheelers have gone up at a rapid pace, much higher than the rate of population growth rate. It is true that quality of life has improved and so is the need of a vehicle but still, the rate at which the number of cars and bikes/ scooters is increasing is disagreeable.

At the time of sale/registration of vehicles authority asks for proof of nationality, identity and address. Nobody asks the proof of income or source of financing the car. People very easily manage to escape from the income tax scanner by taking loan from banks/ financing firms or even friends and relatives.

It may be noted that lakhs of people, particularly government servants or corporate employees who are paying tax in lakhs are unable to afford good cars whereas even some small businessmen are managing expensive luxury cars following unscrupulous practices of evading income tax.

Therefore, now it is a time to take steps to control number of vehicles mainly car and 2 wheelers

Link car, 2-wheeler sale to income to harness vehicular population and increase tax revenue
Source: InSeAsia.com

Just making mandatory to hold a PAN card or Aadhar card or submitting an affidavit regarding the availability of parking space is not enough to check the sale of vehicles. It is time to implement sterner measures and one such step is to link the sale of cars to the income. People not paying income tax should not be allowed to buy a car. In fact, in major cities the people having income at least five lakh per annum should only be allowed to own a car, that too only the entry level cars. For 2-wheelers costing upto 1.5 lakh, the minimum income level may be set to Rs. two lakh per annum. Some relaxation may be given smaller cities and rural areas. People filing higher income returns may be allowed to buy dearer cars. The idea is that ‘how many cars or what level of car a person or a family can be allowed to buy’ should be linked to income shown in the income tax return.

The fair idea of eligibility criteria can be understood from the following table which is not exhaustive and is meant only to set some yardstick to restrict the sale of car/2-wheelers only to the people who are paying income tax.

Income of person/ family per annum Level / number of cars/ 2-wheelers
5-6 lakhs one Car costing upto 5 lakh
6-8 lakhs One car costing upto 8 lakh or one Car costing upto 5 lakh and one 2-wheeler
8-10 lakhs One car costing upto 10 lakh or two cars each costing upto 5 lakh or car + 2-wheelers costing 10 lakh in total
10-15 lakhs Car + 2-wheelers costing 15 lakh in total
15-20 lakhs Car + 2-wheelers costing 20 lakh in total
20-30 lakhs Cars + 2-wheelers worth 30 lakh in total
30 & above lakhs More expensive/ luxury cars

For cars’ registration, the copy of income tax return or Form-16 from an employer should be made mandatory among the documents required. However, for 2-wheelers costing up to Rs. 1.5 lakh the buyer should submit an affidavit that he/she has an income of two lakh or has been financed by somebody having an income of two lakh or more. If a person has an income of say Rs. 3.5 lakh and is already holding a 2-wheeler or Rs. 5 lakh and is already having a car he/she would not be eligible to finance for 2-wheeler.

Very often business owners buy a car in the business firm’s name but for personal use. This should not be allowed because this all is for tax saving rather tax evasion. Any car purchased in firms name should be treated as vehicle being used for commercial purpose and therefore tax at higher rate should be charged. Similarly, 2-wheelers purchased for commercial use should be charged higher tax rate.

Link car, 2-wheeler sale to income to harness vehicular population and increase tax revenue curb

Linking the sale of cars/2-wheelers to income tax return will definitely control vehicle’s population growth though initially, it will result in an adverse impact on the automobile market. But the decline in the automobile sale would neither be substantial nor for a long duration.

The passion of people for cars and 2-wheelers will force them to show their income, pay taxes and then buy the vehicles. This will result in more ‘tax payers’ and higher ‘tax collection’. Similarly, affidavit for purchase of 2-wheelers will turn more people employed/ earning.   Eventually, this will help government to raise its tax revenue and in reducing the unemployment.

No doubt many people and so called ‘rights activists’ may ridicule the idea of linking vehicular sale with income proof as an attack on this or that right of people, but it is the duty of the government to check the activities which may harm the society and the nation. The recent court order seal the illegal factories or commercial units in residential areas is an example of drastic measures to correct the wrong practices going on in the country.

(Disclaimer: The opinions expressed in this article are the personal opinions of the author. The facts and opinions appearing in the article do not reflect the views of NEWSD and NEWSD does not assume any responsibility or liability for the same.)