Demonetisation and revision of Income Tax returns.

Demonetisation, despite the challenges it’s throwing in its wake is also opening new windows of opportunity for both consumers and businesses. The government is doing what can possibly encourage adoption of cashless transaction by either parties, namely sellers and consumers. Right now the sentiment associated with demonetisation is evenly balanced. On the citizen front dissatisfaction is poised to rise should things not improve at ATMs and banks. What is of course not helping is media reports on how crooked citizens are getting around this cashless drive.

It’s of course the worry of taxpayers taking advantage of demonetisation drive and using the tax filing route to protect undeclared income that has prompted the Income Tax department to warn against misuse of the available provision of revising I-T returns. The Central Board of Direct Taxes (CBDT) entrusted with tax policy making has stated it will keep close scrutiny on filing of income tax returns and revisions being made. According to the income tax act, a revised return can only be filed if a person discovers any omissions or wrong statements.

It’s important to note, parting with their earned money via taxes to government doesn’t come easy for citizens. On the earning side, there are research studies out there to prove that a lower tax burden ensures greater tax compliance. On the consumer side too, people are eager to patronise brands that are competitively priced, because lower prices for the same quality means a better value proposition. In an era where commoditisation of brands is all too common, a lower price point makes all the difference to consumers. 

To understand the psyche behind citizens being wary of high taxes and prices, it’s important to take a leaf out of Maslow’s hierarchy. People are driven by their needs and wants, and they by default believe their desires can be better met with greater wealth. Money indeed is the key to happiness, or in other words, the fulfilment of needs and wants. Whether those needs be physiological, sociological, or psychological, money is way to fulfilling every one of them. Human effort on its part is almost always aimed at earning returns, either in cash or kind. Earned wealth is coveted, and therefore not parted with easily. Hence the reluctance to pay taxes, and the hesitancy to buy at higher prices. Smart governments are those that will reduce expenditure, reduce taxes, and exact greater compliance. Smart marketers are those that reduce costs, and convey to consumers a better value proposition for the prices they charge.

Note, tax paying citizens and the price paying consumers are one and the same and so what works for taxes is what works for prices too!