Question 1 · 10 marks · 133 words written
Opening · a date or context
In Budget 2025-26, government has decided to reform India's tax Structure and also brought in New Income Tax Bill 2025.
Body · points and prose
Role in Improving Buoyancy
- Laffer curve → low Tax burden will improve buoyancy
- Consumption and demand side boost due to higher dispoble income → ↑ buoyancy
On Tax Base
(3) Less burden of Tax → ↑ compliance among tax payer (4) Lower incentive to cheat and go for tax evasion among corporates (5) Government projection
Other side (1) Projected loss of revenue → Rs 1 lakh crore (due to lowering of rates) (2) Structural issue persist:
- eg inverted duty structure (3) Removal of exemption on investment given by government → less buoyancy
Close · a quotation
As Adam Smith says, we must follow 3 canons of taxation → Canon of equity, certainty and buoyancy