Mains HDT 2ab Budget Taxes FC Blackmoney Qep2

Mains QEP: Pillar2AB- Budget, Taxation, FC, Black Money
Table of Contents
21 �� Pillar #2: Budget for Mains ........................................................................................... 136

21.1 Definitions / Meaning- Fiscal Policy and Budget.......................................................................... 136
21.2 Budget is bigger than economic horoscope of a nation ................................................................ 137
21.3 Budget is medical report for country’s financial health ............................................................... 137
22 Taxes .......................................................................................................................................... 138

22.1 Tax reforms in recent years (कर सुधार) ............................................................................................... 138
22.2 Tax Expenditure / Revenue Forgone (कर �य/प�र�� राज�)................................................................ 139

22.2.1 Tax expenditure: how it helps the country? (देश को कै से फायदा करता है) ............................................................. 140
22.2.2 Tax expenditure: negative aspects (नकारा�क पहलू) ......................................................................................... 140
22.2.3 Conclusion: Tax Expenditure / tax breaks ................................................................................................ 141
22.3 Taxation → GST ............................................................................................................................ 141

22.3.1 Definition / Origin of GST .......................................................................................................................... 141
22.3.2 GST theory .................................................................................................................................................... 141
22.3.3 GST technological solutions to reduce tax evasion .................................................................................. 142
22.3.4 �� GST: Charms (फ़ायदे)................................................................................................................... 142
22.4 �� GST: Challenges (चुनौ�तयां) ............................................................................................ 142

22.4.1 ��High Rates and Multiple Slabs (उ� दर और कई �ैब)....................................................................... 142
22.4.2 ��Frequent changes harming long term business planning ........................................................... 143
22.4.3 �� Random Fall in collection (आमद म� कमी) ........................................................................................... 143
22.4.4 �Inconvenience to Small Traders (छोटे �ापा�रयों के �लए असु�वधा) ............................................................. 143
(Batch:Mains-QEP2) Mrunal’s Economy Pillar#2AB: Budget → Tax, GST, FC, Black Money → Page 134
22.5 � GST: Conclusion Template (सार/�न�षर्) ...................................................................................... 144
22.6 ��Mock Q for Mains from TAXES ........................................................................................ 144
23 Finance commission (�व� आयोग) ................................................................................................... 146

23.1 FC – an Introduction (एक प�रचय) ...................................................................................................... 146
23.1.1 15th Finance Commission -Theory about Tax Formula & Grants .......................................................... 146
23.1.2 15th FC: performance indicators for grants (अनुदान के �लए प्रदशर्न सूचकांक)........................................................... 148
23.1.3 ✍🏻🏻15th FC: Conclusion (�न�षर्) .................................................................................................................... 150
23.1.4 � 15th FC Report: conclusion (�न�षर्- उनके �रपोटर् क� सराहना-क� ब� बिढ़या �रपोटर् बनाया है).............................................. 150
23.2 FC = Statistical job? ....................................................................................................................... 151
23.3 �(�
��)�
� FC: Giving Permanent Status (�ायी दजार् देना).............................................. 151
23.3.1 ��Arguments against giving permanent status to FC (�वरोध म� तकर् ) .................................................... 152
23.3.2 ��Argument in favour of giving permanent status to FC (प� म� तक)................................................. 152
23.3.3 ✍🏻🏻 Conclusion: give permanent status to FC or not? (�न�षर्) .................................................................... 153
23.4 ✍🏻🏻 Mock Questions for Mains: Finance Commission .................................................................... 153
24 Black Money (काला धन, कर चोरी) ...................................................................................................... 154
24.1 �� Tax: GDP – why low in India (भारत का कर:जीडीपी अनुपात खराब �ों है?) ........................................... 154
24.2 ��Economic Survey on taxation and fiscal capacity (�व�ीय �मता) ......................................... 155
24.3 Definitions related to Black Money .............................................................................................. 155
24.4 Money laundering & PMLA Act ................................................................................................... 157
24.5 Money Laundering / PMLA Challenges ........................................................................................ 157

24.5.1 Money Laundering: Global Challenges ( वै��क चुनौ�तयां) ................................................................................ 157
24.5.2 Money Laundering: Legal Challenges (कानूनन चुनौ�तयां) .................................................................................. 158
24.5.3 Money Laundering: Technological Challenges (प्रौद्यो�गक� क� चुनौ�तयां)............................................................. 158
24.6 Money laundering is bad why? (देश के �लए �ों खराब है).......................................................................... 158
24.6.1 Threat to national security (रा��ीय सुर�ा के �लए खतरा) ........................................................................................... 158
24.6.2 Threat to human development (मानव �वकास के �लए खतरा) ................................................................................... 159
24.6.3 Conclusion- money laundering .................................................................................................................. 159
24.7 Black Money: Timeline of Major Events ....................................................................................... 159

24.7.1 Black Money notable initiatives.................................................................................................................. 160
24.8 ��: � Tax Terrorism / Harassment ......................................................................... 160
24.9 �� Taxpayers’ Charter in � Budget-2020 (करदाताओ का अ�धकारपत्र) ........................................ 161

24.9.1 �� (Indian) Tax Payers' Charter released in 2020-Aug ............................................................. 162
24.10 ��: ��Tax ombudsman: Indian experience............................................................... 162

24.10.1 �problems in previous Ombudsman system (2003-19)? .................................................................... 163
24.10.2 ��: ��Tax Ombudsman: Global experience ............................................................................. 163
24.10.3 ��: �� Tax Ombudsman: Conclusion / way forward (�न�षर्/आगे का रा�ा) ................................... 163
24.11 Demonetization (�वमुद्रीकरण यानी िक नोटबं दी) ....................................................................................... 164
24.11.1 Demonetization – a failed experiment?..................................................................................................... 165
24.11.2 �How did 99.30% SBN returned into banking system? ...................................................................... 165
24.11.3 �99.30% SBN returned, but Demonetization not failed experiment because: .................................. 165
24.11.4 �Demonetization: Impact as per Economic survey 2016-17 .............................................................. 166
24.12 Behavioural Economics: Improving tax collection .................................................................. 166

24.12.1 �� Tax: GDP: 15th Finance Commission on how to improve it? .................................................. 169
24.12.2 Conclusion- Black Money ........................................................................................................................... 170
24.12.3 ✍🏻🏻 Mock Questions for UPSC Mains (250 words each) ........................................................................... 170
21 💼💼💼💼 PILLAR #2: BUDGET FOR MAINS
21.1 DEFINITIONS / MEANING- FISCAL POLICY AND BUDGET

- ‘Fiscal’ is a word derived from Greek. Means ‘basket’ and symbolizes the public purse. Fiscal
Policy is the set of Govt. decisions regarding taxation, expenditure, subsidies and other financial
operations. (कराधान, �य, स��डी और अ� �व�ीय सं चालन हेतु सरकार द्वारा �लए गए �नणर्य)
– Budget is an annual financial statement containing estimated revenues and expenditures for the
next financial year. Budget is the primary tool used by Govt to implement its fiscal policy.
(अनुमा�नत राज� और �य का वा�षक �व�ीय �ववरण, �जसक� मदद से सरकार राजकोषीय नी�त को लागू िक्रया��त है).
– (Significance) Using fiscal policy, Govt influences the savings, investment and consumption in
an economy, to accomplish certain national goals such as income redistribution, socio-economic
welfare, economic development and inclusive growth. (बचत, �नवेश और खपत को सरकार को प्रभा�वत
करती→ आय का पुन�वतरण, सामा�जक-आ�थक क�ाण, समावेशी �वकास हो सकता है)
21.2 BUDGET IS BIGGER THAN ECONOMIC HOROSCOPE OF A NATION

बजट देश क� आ�थक कुं डली से भी बड़ा है
HOROSCOPE BUDGET
predict your future annual financial statement tells about the future income, expense and
deficit of the government.
cannot change the can change/improve the economic future of the country, through taxation
future, it can only (under finance Bill) and public expenditure (through appropriation Bill).
predict it. Then you elaborate with examples, I will not spoonfeed you every thing, it
will not help in your mental growth required for the mains answer
writing.
IMF/World Bank/ Moody’s Rating agency also Give predictions about the
India’s GDP growth. But they cannot change the trajectory unlike budget.
21.3 BUDGET IS MEDICAL REPORT FOR COUNTRY’S FINANCIAL HEALTH

Self explanatory: but if not understood then watch: https://youtu.be/uRKep3M1iTE
Health Indicator Budget Statements

Excess blood sugar not good / excess subsidy / revdi culture / revenue deficit not good. It
diabetes may taste sweet to some voters, but harms economic health.
During the Diarrhoea, food does Revdi/freebie culture/freebies = diarrhoea, money does not
not stay long enough in the stay long enough in the creation of infrastructure / job
intestine so body cannot absorb creation. Capital expenditure, infrastructure ke long gestation
the nutritions. projects are better for economic health.
Low White Blood Cell (WBC) weaker section need to be protected from poverty destitution
count : more chances of through adequate spending on education, health, financial
infection, less change of self- inclusion, insurance, pension, disaster management related
healing. schemes.
Health Indicator Budget Statements
Body Mass Index (BMI): Obesity minimal government required. Disinvestment helps shading
not good. excess weight. ES found after disinvestment, the profitability
of the company improves.
BMI: food intake should be Income tax should not be so high that it encourages black
moderate. money and discourages investment/incentive to work.
Blood Report: Anaemia if not if not enough money spent on education, skill, IPR then youth
enough Hb/iron then blood can’t can’t bring demographic dividend.
carry oxygen to organs
Constipation: food not digested in many schemes / funds, money remains unspent till end of
properly. Causing new disease March, then it doesn’t help in human development. e.g.
Nirbhaya Fund
Junk food / excess eating is not Unregulated Fiscal stimulus can cause overheating problem in
good for health. economy. (Ref Pillar4-GDP or this Youtube Video)
You can draw even more parallel comparisons, but I think this is more than enough for filling up the
word limit.
��Conclusion? Thus, just like a doctor can diagnose a patient’s health by looking at the medical report, an
economist can diagnose / predict a nation’s economic health, financial well-being, & human development potential by
looking at its budget (इस प्रकार, जैसे एक डॉ�र �चिक�ा �रपोटर् को देखकर रोगी के �ा� का �नदान कर सकता है, एक अथर्शा�ी बजट को देखकर रा�� के
आ�थक �ा�, �व�ीय क�ाण और मानव �वकास �मता का �नदान / भ�व�वाणी कर सकता है।)
22 TAXES
We won't waste time on learning theory and concerns about the budget tax, etc. We already done
that in prelims. We'll prepare selective topics that I find useful / important. �ोिक ये बाबूराव का �ाइल है।
22.1 TAX REFORMS IN RECENT YEARS (कर सुधार)

Deleted some - Dividend Distribution Tax (DDT) and Wealth Tax have been abolished.
taxes (लाभांश �वतरण कर और सं प�� कर को हटा िदया)
- GST, Angel Tax, and equalization levy (google tax) have been introduced.
- Crypto currency pe 30% Capital Gains Tax and 1% TDS. (पूंजीगत लाभ कर)
Added some
- A variety of cess and surcharges (उपकर और अ�धभार) have been introduced,
taxes
namely Health and Education cess, social welfare surcharge, Agriculture
Infrastructure and Development Cess, and Road & Infrastructure Cess.
- Corporation tax and income tax have been reduced. (�नगम कर और आयकर म�
कटौती)
Reduced some - A new income tax regime (NTR) has been introduced that allows tax saving
taxes without locking money in long-term investments and keeps more disposable
income in the hands of people.
- Stamp duty on shares and bonds has been rationalised.
BLACK - Refer to separate section on it.
MONEY
Tax terrorism
22.2 TAX EXPENDITURE / REVENUE FORGONE (कर �य/प�र�� राज�)

(Definition) When the government provides tax breaks, exemptions, and deductions to a) boost
some sectors of the economy or b) to provide some type of relief to the taxpayers, then the
government suffers a monetary loss. This monetary loss is called Tax expenditure / revenue forgone.
(जब सरकार िकसी �ेत्र को प्रो�ाहन देने के �लए या करदाता देने के �लए करों म� छू ट देती है तो अंततः सरकार का जो आ�थक नुकसान
होता है उसे कर �य कहते ह�)
Some notable examples include:
– Tax holidays given in SEZ, GIFT City, to startup companies.

– Reduced capital gains tax if a person sells a home to buy a new home.
– Income tax benefits for loans taken for the purchase of a first home.
2017: reduced the Income tax rate
Income Tax Before After

Lowest Slab 10% 5%
2019: reduced the corporation tax on domestic companies.
Corporation Tax Before After 2019-Reform

Existing Indian Company 30% 22%
New Company setup on / after 1/Oct/2019 30% 15%
Impact of Corporation tax reduction: ₹1.45 trillion revenue forgone in 2019–20.
2020: introduced the new income tax regime (NTR) then 2023: made further reforms in it. NTR also
allows some of the Income Tax payers to save money compared to old tax regime.
22.2.1 Tax expenditure: how it helps the country? (देश को कै से फायदा करता है)
– Increasing disposable income in the hands of taxpayers leads to increased demand, production,
GDP, and job creation.
– If a company has to pay less tax, it can utilize the saved money for business expansion, factory
development, recruitment, etc.
– Providing tax breaks to foreign companies could encourage them to establish headquarters in
India, such as in Gift City.
– Women empowerment: Some state governments provide a reduction in stamp duty if the land
property is registered in the name of a female/wife/mother, etc. This also promotes female
empowerment and reduces the risk of forced eviction after domestic violence. मिहला सश��करण
– Pollution control: Tax benefits are given on the purchase of electric vehicles. प्रदू षण �नयं त्रण
– Reducing share market volatility: Suppose you sell a share at a profit, how much capital gains tax
do you have to pay? (शेयर बाजार म� अ��रता कम करता है)
HOLDING PERIOD CGT TAX ON PROFIT
IF SOLD WITHIN 12 MONTHS OF PURCHASE 15% Short-Term Capital Gains (STCG)
IF SOLD WITHIN AFTER 12 MONTHS 10% Long-Term Capital Gains (LTCG)
Since the long-term capital gains tax is lower than STCG, it encourages the investor not to sell shares
unnecessarily before one year, which automatically reduces the price volatility in the Sharemarket.
22.2.2 👎👎Tax expenditure: negative aspects (नकारा�क पहलू)
– Reduces the revenue collection & fiscal capacity of the union. Increases the revenue deficit / fiscal
deficit.
– Government will have to cover up the deficit through other sources of income, but there are
challenges as given in following chart
22.2.3 👋👋👟👟Conclusion: Tax Expenditure / tax breaks

– Although tax expenditure causes a financial loss to the government. However, it indirectly
encourages economic growth, job creation, infrastructure development, women’s
empowerment, and other positive impacts on the nation.
– But, we must avoid excessive tax breaks as it weakens the fiscal capacity of the union.
– The real test of policymakers lies in finding a calibrated balance between both ends. (देश के आ�थक
वृ�द्ध और मानव �वकास के �लए करों म� छू ट देना ज�री लेिकन एक हद से �ादा छू ट दे दी तो सरकार को �व�ीय नुकसान भी होता है.
इस�लए एक उ�चत म�म मागर् ढू ंढना ही नी�त �नमार्ताओं क� असल कसौटी है.)
22.3 TAXATION → GST
22.3.1 Definition / Origin of GST

- (Meaning) GST is a destination based indirect tax on consumption of goods and services. (जीएसटी
व�ुओ ं और सेवाओं के खपत-�ान पर आधा�रत अप्र�� कर है।)
- (Origin) It was introduced on 1st July 2017, after the 101st constitutional amendment act.
- The GST has replaced several earlier indirect taxes that were levied by the union and states.
Notable examples are service tax, excise duty, entertainment tax, and VAT.
- (Significance) GST provides input tax credit (ITC) to the supplier/merchant, and thereby a)
reduces cascading effect of taxes and b) reduces the scope/motivation for tax evasion.
22.3.2 GST theory

- What are the functions of GST Council? What is iGST/CGST/SGST, what is zero rated export,
etc done in Prelims Handout
22.3.3 GST technological solutions to reduce tax evasion

- E-Way bill / E-invoicing
- Geotagging of the firms and cargo vehicles.
- Cross-referencing the transactions through Aadhar-PAN link.
- GSTN portal gives free downloadable accounting softwares for the small traders.
- HSN/SAC codes for the goods and services will making bills.
22.3.4 🍋🍋🍋🍋🍋🍋 GST: Charms (फ़ायदे)

Note: Following matters already explained enough in Prelims Handout.
22.4 🍋🍋🍋🍋🍋🍋 GST: CHALLENGES (चुनौ�तयां)

22.4.1 🔢🔢🔢🔢High Rates and Multiple Slabs (उ� दर और कई �ैब)
➢ In, Singapore GST only 7%, Australia GST only 10%.
➢ But in India, Whereas in India we’ve too many SLABS: 5-12-18-28% slabs. (✋ignore
hairsplittery/pedantry over diamond etc ke 0.125% CGST walle slabs.) Critics argue, we need to
reduce the number of GST tax labs.
➢ Many daily necessities are in 18% GST slab. Indirect taxes regressive in nature & harm
purchasing power of poor. (गरीबों क� खरदी श�� को कम करता है)
➢ Petrol, diesel, electricity: not subjected to GST regime yet, So, businessman cannot claim GST-
input credit on them. Even when crude oil prices are ⬇ in the international market, the Union
and State governments ⏫ Union excise and state VAT on the petroleum fuels just to earn more
revenue, which further aggravates the inflation and business cost. (�व� बाजार म� क�ा तेल स�ा होने पर
सरकार �ादा आमदनी के �लए उ�ाद शु� और वेट क� दर बढ़ा देती है।)
22.4.2 �😢😢Frequent changes harming long term business planning

 Frequent changes in GST rates makes it difficult for the companies to plan long term business
strategies. (जीएसटी क� दरों म� बार बार बदलाव के चलते, उधयोगप�त लं बी समयाव�ध के �लए रणनी�त नहीं बना पाते।)
 E.g. In 2019-Sept, GST on Caffeinated beverages ⬆ from 18% → 28%. This will ⬇ sales. If any
soft-drinks company had invested in factory expansion it would suffer. �
 15th Finance Commission Chairman NK Singh has also criticized frequent changes in GST rates.
22.4.3 📉📉📉📉 Random Fall in collection (आमद म� कमी)

 Corona pandemic (महामारी),
 Protectionism (सं र�णवाद) by USA, EU and China = they’re imposing more duties on Indian
exports→ Indian exports become expensive for foreigners → sales ⬇ → manufacturing and
service sector production declined → GST ⬇(More in �Pillar#3)
 Automobiles, consumer durables (TV, fridge etc), real estate ⬇ due to variety of reasons.
 Unscrupulous traders setup phony shell companies and generate fake invoices to claim input tax
credit through Circular Trading. (How it works?=Modus operandi NotIMP.)
 As a result, States are complaining that GST compensation cess amount is not released in a
timely fashion by the Union Government. → State funded welfare schemes suffer. �
 This problem has aggravated further during/after Corona pandemic (2020)
22.4.4 🤯🤯Inconvenience to Small Traders (छोटे �ापा�रयों के �लए असु�वधा)

➢ 😭😭 In GSTN webportal, the traders have to deposit the GST on monthly basis, upload various
forms & invoice details, generate e-way bills. While govt has tried to keep these online forms/
mechanisms as simple as possible, but since many small traders are not proficient with
computer, excel / accounting software, internet, digital payments- GST-compliance creates
inconvenience to them, and forces them to hire full time accountants, ⏫ cost of operations.
○ 😾😾 (Counter: Even in erstwhile VAT system they had to upload similar things online so,
it’s not entirely new or alien system imposed upon them. Besides, they can opt for the
GST composition scheme where they have to upload things on quarterly basis instead of
monthly basis. GSTN portal also provides free accounting software to small traders so
they don’t have to spend ₹ in buying proprietary software like Tally)
➢ 😭😭 GSTN server crashes often so traders can’t upload things on time, and then they’ve to pay
penalty for crossing monthly deadlines. (सवर्र म� बार बार तकनीक� ख़राबी आ जाती है)
○ 😾😾 (Counter: GST Council has reduced the late-fees, GSTN portal has been given
technical upgrades to reduce the glitches/outages.)
➢ GST officers engage in harassment of the traders for the purpose of bribery, by threatening to
arrest them even for small mistakes.
○ Many small mistakes/non-compliances have been decriminalised / only penalty need to
be paid. Thereby, reducing the nuisance power of the officers in giving threats of arrest.
➢ 😭😭 Malaysia scrapped GST in 2018 due to popular uproar against it, So it will not be successful
in India either! (मले�शया म� जन आक्रोश के चलते GST को हटा िदया गया तो भारत म� भी ये नहीं चलेगा।)
○ 😾😾 (Counter: Malaysia had subjected all the goods and services to a flat rate of 6% and
the opposition parties were blaming it for the inflation, and there were many political
dimensions to the entire controversy. Whereas in India, we have kept many daily
necessity goods at 0% to 5% GST. RBI has been successful in keeping the inflation within
2-6% CPI limit. GST is implemented through Constitutional Amendment so even if
Rahul Gandhi promises to “UNDO” this Gabbar Singh Tax, he’ll have to go for another
Constitutional Amendment to scrap the GST which is not so easy.)
22.5 ✍ GST: CONCLUSION TEMPLATE (सार/�न�षर्)

(if asked to examine critically the challenges or obstacles in GST) Any new change is accompanied
by difficulties and problems at first. A tax reform as comprehensive as GST is bound to pose certain
challenges not only for the government but also for business community, tax authorities and even
common. But ultimately, <write any of below benefits> �ाभा�वक है िकसी भी बड़े सुधार से शु� शु� म� असु�वधा
1. With the aforementioned features / benefits, GST will help India progress towards “ONE
NATION, ONE TAX, ONE MARKET”. एक रा�� एक कर एक बाजार OR
2. Indeed, the introduction of GST is truly a game changer for Indian economy as it has replaced
multi-layered, complex indirect tax structure with a simple, transparent and technology–driven
tax regime. OR ब�-��रत, जिटल अप्र�� कर सं रचना को एक सरल, पारदश� प्रौद्यो�गक�-चा�लत कर �व�ा के बदल िदया
3. Thus, GST eliminates cascading of taxes,⏬ operational costs, thereby ⏫ ease of doing business
and catalysing Indian economy. करों का सोपानी प्रभाव, लागत म� कटौती, �ापार म� सुगमता, अथर्तंत्र उद्दीपन
22.6 ✍🎺🎺MOCK Q FOR MAINS FROM TAXES

1) Budget is an indicator of financial health of a country which is reflected in the statement of
income and expenditure. (बजट िकसी देश के �व�ीय �ा� का सं के तक है, जो आय और �य के �ववरण म� प्र�त�ब�ं बत
होता है।)
2) Budget is more than the economic horoscope of the nation (बजट देश क� आ�थक कुं डली से भी बड़ा है)
3) (PYQ-GSM3-2018) Comment on the important changes introduced in respect of the Long-term
Capital Gains Tax (LCGT) and Dividend Distribution Tax (DDT) in the Union Budget for 2018.
क� द्रीय बजट 2018 के दीघर्का�लक पूंजीगत कर (एलसीजीटी) और लाभांश �वतरण कर (डीडीटी) के सं बंध म� पेश िकए गए मह�पूणर्
प�रवतर्नों पर िट�णी कर�। → �Note we NEED not prepare due to poor cost:benefit of preparing for
chartered accountant, knowledge. Q given is only for observation. After 2018, they have not
asked such a chartered accountant question.
4) (PYQ-GSM3-2013) What is meaning of the term tax-expenditure? Taking housing sector as an
example, discuss how it influences budgetary policies of the government. (कर-�य / प�र�� राज�
श� का अथर् �ा है? आवास �ेत्र को एक उदाहरण के �प म� लेते �ए, चचार् कर� िक यह सरकार क� बजटीय नी�तयों को कै से प्रभा�वत
करता है।)
5) (PYQ-GSM3-2020) Explain the rationale behind the Goods and Services Tax (Compensation to
States) Act of 2017. How has COVID-19 impacted the GST compensation fund and created new
federal tensions? (वा�ु एवं सेवा कर (रा�ों को ��तपू�त) अ�ध�नयम, 2017 के तकार्धार क� �ा�ा क��जए l को�वद-19 ने
कै से वा�ु ◌ाववम सेवा कर ��तपू�त �न�ध (जी.एस.टी.कॉ�े�ेशन फ�) को प्रभा�वत और नये सं घीय तनावों को उ�� िकया है?)
Ans. Prelims Handout Back2Back loans
6) (PYQ-GSM2-2017) Explain the salient features of the constitution (One Hundred and First
Amendment) Act, 2016. Do you think it is efficacious enough ‘to remove cascading effect of
taxes and provide for common national market for goods and services’? १०१ वे सं �वधा�नक सं शोधन
अ�ध�नयम, 2016 क� मु� �वशेषताओं को �� कर�। �ा िक करों के सोपानी प्रभाव को हटाने और आम रा��ीय बाजार बनाने के
�लए यह पयार्��प से प्रभावकारी है? Ans. Prelims Handout.
7) (PYQ-GSM3-2019) Enumerate the indirect taxes which have been subsumed in the Goods and
Services Tax (GST) in India. Also, comment on the revenue implications of the GST introduced
in India since July 2017. (उन अप्र�� करों को �गनाइए जो भारत म� व�ु एवं सेवा कर म� स��लत िकये गए ह� | भारत म�
जुलाई २०१७ से िक्रया��त (जी. एस. टी) के राज� �निहताथ� पर भी िटप�ी क��जए |) Ans. Prelims Handout.
8) Examine critically the apprehensions surrounding the GST compensation to the States. What
measures have been taken by the Union Government in this regard. (रा�ों को जीएसटी मुआवजे देने
सं बं �धत आशं काओं क� जांच कर�। इस म� क� द्र सरकार द्वारा �ा उपाय िकए गए ह�?)
9) “Is GST a boon or a bane?” examine critically from State governments’ perspective. "�ा जीएसटी
एक वरदान या अ�भशाप है?" रा� सरकारों के ��कोण से गं भीर �प से जांच कर�।
10) “Is GST a boon or a bane?” examine critically from the small traders’ perspective. छोटे �ापारी
11) With respect to ease of doing business in India, discuss the importance of following (1) E-Way
Bill System (2) Authority for Advance Ruling. भारत म� �ापार करने म� आसानी के सं बं ध म�, �न��ल�खत के मह�
पर चचार् कर� (1) ई-वे �बल प्रणाली (2) अ�ग्रम फै सलों के �लए प्रा�धकरण (Hint: given in prelims handout)
23 FINANCE COMMISSION (�व� आयोग)
23.1 FC – AN INTRODUCTION (एक प�रचय)

- Fiscal Federalism refers to the division of responsibilities of i) taxation and ii) expenditure
between the different levels of the government. (राजकोषीय सं घवाद: क� द्र और रा�ों के बीच कराधान और खचर् क�
�ज�ेदा�रयों का आवं टन/बटवारा/�वभाजन)
- While the 7th schedule assigns many responsibilities to the States but their taxation power is
relatively lower than Union’s. So, Finance Commission plays a key role in transferring union’s
revenue resources to the state.. रा� क� कराधान श��यां कम है इस�लए �व� आयोग क� द्र के करो से िह�ा िदलाता है
- Article 280: President of India forms a Finance Commission (a quasi-judicial body) every 5th
Year or earlier, with 1 chairman and 4 members. Eligible for re-appointment. Recommendations
are not binding on the government but usually not rejected. The last finance commission (15th)
was constituted under N K Singh.
23.1.1 15th Finance Commission -Theory about Tax Formula & Grants
- Who was the chairman, terms of reference, horizontal tax devolution formula, various types of
grants = refer to Refer to Prelims Handout. I am posting mind maps for quick revision
23.1.2 15th FC: performance indicators for grants (अनुदान के �लए प्रदशर्न सूचकांक)
23.1.3 ✍🏻🏻15th FC: Conclusion (�न�षर्)
 Some state governments do not like such performance benchmark. They contend it is their
constitutional right to get the money. (कु छ रा�ों का मानना है क� उ�� बना शत� के �बना प्रदशर्न मानदंड ओके पैसा
�मलना चािहए �ोंिक वे उनका सं वैधा�नक अ�धकार है)
 But, Economic Survey 2016-17 had observed ‘aid-curse’ ('सहायता-अ�भशाप') i.e. over the years,
Special Category States received large amount of funds via Planning Commission and Finance
Commissions yet couldn’t perform well in poverty removal or economic growth due to lack of
accountability and poor governance. (योजना आयोग और �व� आयोग ने दशकों तक �पछड़े रा�ों को पैसा देते िक�ु
कु शासन के चलते गरीबी उ�ूलन व् आ�थक वृ�द्ध नहीं �ई. )
 The 15th FC terms of reference and conditional grants aimed to link the fund transfers with
performance and accountability parameters. While states are apprehensive, but we’ll have to
swallow this bitter pill eventually to ⬆ India’s human dev. & economic growth. (नया �व� आयोग
प्रदशर्न आधा�रत प्रो�ाहन और जवाबदेही क� बात करता है वो आवकायर् प्रशं सनीय है, भारत के मानव �वकास और आ�थक वृ�द्ध के
�लए, ये कड़वी दवा हमने पीनी होगी)
✋Error in Answer Writing: Don’t digress to unsolicited Babu-Shona type suggestions &
overthinking like “Southern states should help Northern states in their family planning programs.”
OR
23.1.4 ✍ 15th FC Report: conclusion (�न�षर्- उनके �रपोटर् क� सराहना-क� ब� ब�ढ़या �रपोटर् बनाया है)
✓ Sustainable Development Goal#10: ⏬ inequality within the country. SDG-Goal#16 requires
nations to build effective, accountable and inclusive institutions at all levels. (सतत �वकास ल�:
असमानता को कम करो | लोक प्रशासनके सभी �रो मे सं �ानो को प्रभावी, जवाबदेह और समावेशी बनाओ)
✓ In this regard, 15th FC has tried to provide a framework for
○ 1) equitable distribution of revenue 2) incentives tied with performance. ऐसा ढांचा जहा 1)
कर-�वतरण समानता के साथ और 2) प्रो�ाहन प्रदशर्न के िहसाब से �मलेगा
✓ It’ll greatly help to improve India’s human dev+ eco dev. मानव �वकास और आ�थक �वकास मे मदद
23.2 FC = STATISTICAL JOB?

(PYQ-PubAD) Finance Commission in India performs the job of statistical aggregation. Comment
(भारत म� �व� आयोग सां��क�य एकत्रीकरण का कायर् करता है)
- First of all, I don’t fully agree with the statement because the work of finance commission is
much more than mere statistical aggregation.
- Yes, it has to collect the data related to following indicators for designing, i) tax-devolution
formulas and ii) grants formulas. Such as
Indicator is used in designing tax devolution Indicator is used in designing grants
formula
- GSDP, poverty - Frequency of natural disasters

- Population, total fertility rate - Revenue deficit of the state
- Tax collection / tax efforts - Education, judicial case pendency, rural
- Area, Environment ecology roads etc.
- Number of ULB / panchayats
- healthcare indicators.
��Conclusion? Thus, finance commission has to collect variety of statistical data sets before
recommending tax devolution formula and grants. So, we can say it performs the job of statistical
aggregation.
23.3 �(🍋🍋🍋🍋⚖�)⏰ FC: GIVING PERMANENT STATUS (�ायी दजार् देना)
Figure 1: CAG-UPSC जेसी कायम चालू रहेने वाली सं �ा बनाओ FC को- तभी ठीक से काम होगा- श��कांता
(Introduction: Origin) Shaktikanta Das, the Governor of RBI and a member of the 15th Finance
Commission (FC), had recommended giving a permanent status to the FC, wherein the old
commission continues to implement & monitor the recommendations till the next commission
starts functioning. (जब तक नया �व� आयोग नहीं बनता पुराने �व� आयोग क� ऑिफस खुली रखनी चािहए)
23.3.1 �👎👎Arguments against giving permanent status to FC (�वरोध म� तकर् )
 Indian economy and Indian union has functioned successfully for over 70 years with this
mechanism, so there is no need for such constitutional amendments and experimentations.
(वतर्मान �व�ा यो��प से चल रही है, नए सं वेधा�नक प्रयोगो क� कोई ज�रत नही )
 Both NITI Aayog and GST Council provide a platform for cooperative federalism (सहकारी सं घवाद
क� चचार् के �लए मं च उपल�).
 Further, we already have the CAG to audit the accounts of the Union and the States.
 Therefore, Giving permanent status to FC= duplication of efforts.(प्रयासों का �थर् दोहराव)
 Even if the FC given a permanent status → states ruled by opposition parties will continue to
allege injustice & partiality, just like they allege with the functioning of Election Commission.
 Then, the Union Finance Ministry’s precious time will be wasted in filing counter-responses to
the States at FC. (�व� आयोग पूरा समय रा�ों क� फ�रयाद सुनता रहेगा और क� द्र सरकार उसी के जवाब देने म� लगी रहेगी)
23.3.2 �👌👌Argument in favour of giving permanent status to FC (प� म� तक)

 Election Commission has a permanent status even though elections are to be conducted every 5
years. Previous Lok Sabha’s speaker continues to hold position until new Lok Sabha meets for
the first time. Following this rationale, Shaktikanta Das’s suggestion that “Previous Finance
Commission should continue to function & oversee the implementation of its recommendations
until new FC is formed” is valid. (चुनाव तो 5 साल म� एक बार होते ह� िफर भी चुनाव आयोग क� ऑिफस खुली रहती है)
 Finance Commission recommendations are valid for a block of 5 years. Even if there is a war,
disaster, famine or an economic crisis which may affect the revenue collection of the union vs.
the demands by the States, still, the FC-formula/recommendations cannot be modified/finetuned
in-between the five years. So, even if Union/states are feeling any injustice in the FC-formula,
they have to wait for five years to make pleas to the next Finance Commission.
 If FC has a permanent secretariat/office = staff will keep all the records/ Knowledge bank for
future reference, and a few officers will act as ‘Resource Persons’ to assist the new panel. Then,
there will be more consistency in the FC recommendations. (जानकार �ाफ का तबादला हो जाता है)
 Such permanent body can keep a constant vigil (अ�वरत सतकर् ता) on the Union and State finances &
revenue collections and hold them accountable for any transgressions or lethargy (उ�ं घन / सु�ी).
[Present approach of the union governments is if they are not getting enough taxes, they will simply
borrow more money and changing the FRBM targets/goalposts as per their convenience. More
under � Pillar2D:FRBM handout]
 Previously, Union and States designed their five-year plans, and so it made sense to have a ‘five-
year formula for tax distribution’. But now the five-year planning system has been discontinued.
पं चवष�य योजनाओं का दौर ख� हो चुका है, इसी हमने 5-5 वषर् के मान�सकता से �नकलकर �नरंतर �नगरानी रखनी चािहए
23.3.3 ✍🏻🏻 Conclusion: give permanent status to FC or not? (�न�षर्)
⇒ �(In-favor) Considering the aforementioned benefits, Finance Commission should be given a
permanent status for better monitoring, accountability, grievance redressal in the matters related
to fiscal federalism. (राजकोषीय सं घवाद के मामलों म� बेहतर �नगरानी, जवाबदेही और �शकायत �नवारण के �लए �व�आयोग
को �ायी दजार् देना लाभकारक होगा.)
⇒ �(Against) Considering the aforementioned issues, the present constitutional and institutional
mechanisms are adequate for fiscal federalism; they do not merit any changes for the time being.
(वतर्मान प्रणाली सुयो�, िफ़लहाल कोई प�रवतर्न अनाव�क)
23.4 ✍🏻🏻 MOCK QUESTIONS FOR MAINS: FINANCE COMMISSION

1) (PYQ-PubAD) Finance Commission in India performs the job of statistical aggregation.
Comment (भारत म� �व� आयोग सां��क�य एकत्रीकरण का कायर् करता है)
2) (PYQ-GSM2-2021) How have the recommendations of the 14th FC enabled the States to
improve their fiscal position? [भारत के 14व� �व� आयोग क� सं �ु�तयों ने रा�ों को अपनी राजकोषीय ��त सुधारने म�
कै से स�म िकया है ?] [We’ll not solve it because 14th FC too outdated.]
3) Compare and contrast the horizontal tax devolution approaches of 14th FC vs 15th FC �े�तज कर
अंतरण के �सध्द्धांतों मे 14वा और 15वे �व�आयोग क� समानता व �भ�ता क� तुलना क��जए (Hint: refer to Prelims
handout)
4) Enumerate the grants suggested by 15th FC. अनुदानों क� सूची दी�जए।
5) Examine the rationale behind adding performance based indicators in the grants given by the
15th finance commission. (15व� �व� आयोग द्वारा िदए गए अनुदान म� प्रदशर्न आधा�रत सं के तक जोड़ने के पीछे के तकर् क�
जांच कर�।)
6) “The constitution of GST Council has reduced the role of Finance Commission as the balancing
wheel of fiscal federalism in India.” Do you agree? Justify your stand. ("जीएसटी प�रषद के गठन ने �व�
आयोग क� भारत म� राजकोषीय सं घवाद के सं तुलन म� भू�मका को कम कर िदया है।" �ा आप सहमत ह�? अपने तकर् को उ�चत
ठहराएं ।)
7) Examine critically the merits of giving a permanent status to the finance commission. �व� आयोग
को �ायी दजार् देने (के सुझाव) क� यो�ता क� गं भीर समी�ा क��जए.
24 BLACK MONEY (काला धन, कर चोरी)
(DATA) Since 2016, India’s Tax : GDP has remained mostly stagnant at 11%. It is lowest among the
BRICS Nations. Hardly 7% of Indian voters are income tax payers.
(DATA source: GOOGLE BARD) Brazil Russia India China South Africa
% of voters who are income tax payers 20% 35% 7% 7.1% 24%
Tax to GDP Ratio 28% 17% 11% 22% 25%
24.1 🍋🍋🍋🍋 TAX: GDP – WHY LOW IN INDIA (भारत का कर:जीडीपी अनुपात खराब �ों है?)
1) Lack of civic sense among people that paying taxes is a basic duty. (देश के प्र�त कतर्� क� भावना नहीं)
2) Presence of informal sector, parallel economy, cash based economy provides ample
opportunities of hiding income. (नगदी आधा�रत अनौपचा�रक अथर्तंत्र)
3) Low per capita income, high level of poverty. Concentration of income in the hands of few
people- who are greedy to engage in tax evasion & avoidance. (देश क� �ादातर सं प�� चु�नदं ा लोगों के हाथों
म� क� िद्रत, जो लालच म� कर जमा नहीं करते)
4) Election funding → source of corruption → black money. Politician-Builders-Mafia nexus.
5) Due to political considerations, state govts and local bodies do not levy all the taxes authorised
by the constitution e.g. tax on agricultural income. So our (direct) tax base is narrow. [Tax base:
कराधार means the total value of all the persons/income/property, etc. on which tax is charged.]
6) Loopholes in the tax laws encourage tax avoidance (कर कानूनों म� खा�मयां)
7) Direct taxes like wealth tax, gift tax and estate duty suffered from loopholes, lax monitoring and
evasion. They didn’t yield much revenue. Hence even referred as ‘paper taxes’, and had to be
abolished ultimately. (कागजी कर �जनसे वा�व म� नाम मात्र क� आमदनी होती थी)
24.2 📘📘📘📘ECONOMIC SURVEY ON TAXATION AND FISCAL CAPACITY (�व�ीय �मता)
The Economic Surveys of 2015, 2016, 2017 have repeatedly observed that
- Democracy is a contract. Taxation is the economic glue that binds government and citizens into
this contract. (लोकतं त्र एक अनुबंध है, कराधान एक आ�थक गोंद)
- But, whenever govt delivers poor quality of service in public schools, hospital etc. → middle
class & rich citizens will “EXIT” towards the pvt school & hospitals → Then they feel ‘moral
right’ to evade / avoid taxes, bcoz, they are no longer using public services.
- Result? hardly 7% of Indian voters are taxpayers (23% is desirable, as per our level of
development against BRICS nations. भारत के के वल 7% मतदाता करदाता है)
- Govt gets less taxes → poor fiscal capacity → poor services → vicious cycle continues and
results in ⏬ of govt’s accountability towards citizens. (सरकार क� जवाबदेही कम होती है)
24.3 DEFINITIONS RELATED TO BLACK MONEY

Black Money It is an income or transaction that is taxable yet NOT reported to the tax
(काला धन) authorities concealed from the tax authority.
कालाधन ऐसी आय/लेनदेन है जो क� कर-पात्र है, िक�ु कर-अ�धका�रयों से �छपाई गई.
Parallel Economy The economy that runs on black money. (समानांतर अथर्�व�ा जो काले धन पर चलती है)
👺👺Tax Evasion When person hides income or transaction from tax authorities, and thereby
(कर अपवं चन evades paying taxes. It’s illegal. (कराधान यो� आय या लेन देन को सरकार से �छपाना)
कर-चोरी)
🤵🤵🤵🤵Tax When person discloses his income and transactions to tax authorities but uses
Avoidance legal loopholes to avoid paying taxes. E.g. Bollywood stars who register digital
(कर प�रहार media companies in Tax Havens. It may not be illegal in every case, but still
कर-टालना) unethical. (कराधान यो� आमदनी या लेनदेन को सरकार से �छपाना निह, लेिकन क़ानून मे �छद्रों के
इ�ेमाल द्वारा कर को टालना जाना। )
🍸🍸Tax Haven Is a country that demands little taxes from foreigners and offers legal
(कर �गर्) loopholes for Tax Avoidance & opportunities for Tax Evasion. E.g.
एसा देश जहां कर टालने / Liechtenstein, Mauritius, Marshall Islands, Cayman Islands, Panama, Nauru,
Vanuatu etc. These countries are geographically small, & without viable
�छपाने के �लए ब�त अवसर
economy. So they offer such mechanism to attract foreign investors and
�मलते ह�
foreign tourists.
👺👺→🤵🤵Money ⇒ When drug trafficking, ransom, corruption and other criminal activity
laundering generates substantial profits, the criminal tries to spend / invest / hide the
(गैरकानूनी तरीके से प्रा� money without attracting attention.
धन को वैध बनाना) ⇒ Money laundering (धनशोधन) is the process of disguising the source of
money, as if it came from a legitimate activity, & then channelize it into
banks, share market and other financial intermediaries.
Organizations ⇒ Enforcement Directorate (प्रवतर्न �नदेशालय), Income Tax Department,
Financial Action Task Force (Grey List), etc.
24.4 MONEY LAUNDERING & PMLA ACT
- (Definition) money laundering is the process of converting black money into white. (काले धन को
वैध या सफ़े द बनाने क� िक्रया को धन शोधन कहते ह�)
Prevention of Money Laundering Act (PMLA) 2002, aims to combat it using following ways:
- PMLA increases the power of enforcement directorate, financial intelligence unit and other
agencies.
- PMLA requires the financial institutions (Bank NBFC etc) to report suspicious transactions to
the respective financial regulators (RBI, SEBI etc) / government. (सं िद� लेनदेन के बारे म� सूचना देनी होगी)
- Allows Indian government to enter in international agreements against money laundering.
- Minimum 3 years to max 10 years jail. And then as per Representation of the People Act (RPA
Act)- 2 year jail = person is banned from contesting elections for six years. (�ूनतम 3 साल क� जेल यानी
अपने आप ही वो भ�व� म� 6 साल तक चुनाव नहीं लड़ पाएगा)
- Confiscation / attachment of the property. (सं प�� क� ज�ी)
24.5 MONEY LAUNDERING / PMLA CHALLENGES
24.5.1 😰😰Money Laundering: Global Challenges ( वै��क चुनौ�तयां)

- Financial action task force was setup to combat money laundering and tax evasion.
- 2008: Pakistan was first added in the grey list of FATF (and then again in 2018)
- And accordingly, it was subjected to certain international sanctions / restrictions until it fixed its
legal-administrative loopholes that allowed money laundering / terror finance.
- 2022: Pakistan removed from grey list after complying with all the regulations of FATF.
- Thus over a decade of international pressure was required to just fix one country that was
supporting money laundering. And there are still many other countries / tax havens left in the
grey list and black list. (एक दशक तक अंतररा��ीय दबाव बना रहा तब जाकर पािक�ान ने धन शोधन और आतं क�
�व�पोषण के �खलाफ़ स�ी िदखाई)
- Tax haven nations provide opportunities for money laundering. Coordinated global action
required but many multinational companies themselves are beneficiaries of tax haven, so they
could be doing some lobbying / political funding in the developed nations to avoid strict
sanctions. (ब�रा��ीय कं प�नयां खुद ही कर-�गर् म� मु�ालय बनाती है तो इसम� आ�यर् नहीं होगा िक �वक�सत देशों म� वे
राजनी�तक प�ों को चुनावी फं िडगं देकर ऐसे कर-�गर् देशों के �खलाफ़ हो रही स� कारर्वाई को धीमा करवात� होंगे)
24.5.2 😰😰Money Laundering: Legal Challenges (कानूनन चुनौ�तयां)

- If the accused person runs away to foreign country difficult to get him extradited ( �वदेश से प्र�ापर्ण)
- Cases drag for years / Accused person runs away to foreign country / dies in jail before revealing
real masterminds e.g. Abdul Karim Telgi. ( �ा�यक �वलं ब)
- income tax act exempts political parties, religious bodies and charitable institutions from paying
income tax. → it creates an ecosystem for money laundering through donation.
- Nexus/need of black money to win election = deter political parties to be as a strict against
money laundering compared to strictness with terrorism. (चुनाव जीतने के �लये काले धन क� ज�रत)
24.5.3 😰😰Money Laundering: Technological Challenges (प्रौद्यो�गक� क� चुनौ�तयां)

- Crypto currency transactions difficult to trace. (Although now crypto-companies also required
to report suspicious transaction to the government, but difficult to enforce this on the companies
located outside India.)
- Darknet / self deleting encrypted messages / iPhone auto-erase / variety of chatting apps etc.
have made the communication more easy for the criminals and difficult for the law enforcement.
(गु� मैसेज प्रणा�लयाँ)
24.6 MONEY LAUNDERING IS BAD WHY? (देश के �लए �ों खराब है)
24.6.1 Threat to national security (रा��ीय सुर�ा के �लए खतरा)

- Augments the power of terrorist, criminals and corrupt people.
- Revenue loss to exchequer = Government cannot spend enough on infrastructure, health,
education, human development schemes. Consequently, (सरकार �श�ा �ा� आिद द�ु � न कर पाए)
- Unemployed Youth in Naxal/LWE/JK/NE areas easy prey to anti-India propaganda = threat to
India’s sovereignty, national integrity, security. (बेरोजगार युवाओं को देश के �खलाफ़ भड़काया जाए)
Literacy Census-2011
All India 74%
Literacy Census-2011
Manipur 79%
Mizoram, Sikkim, Nagaland, Tripura over 80%
- So North East youth is educated, but there is lack of jobs / biz opportunities → pushes some of
them towards the Anti-India Propaganda / extremism / migrate towards other cities/nations.
24.6.2 Threat to human development (मानव �वकास के �लए खतरा)

- low tax collection = low quality of education and infrastructure in government schools and
hospitals → middle-class family becomes more reliant on private sector and then middle class
feels cynical about paying taxes and look for opportunity to do tax evasion for themselves. (म�म
वगर् मी �नराशावाद)
- low tax collection = teachers recruited on fixed salary contracts and made to do many other tasks
such as election, NSO surveys, welfare scheme registration, vaccination drives etc. Since the
government cannot recruit dedicated employees for each of these tasks. = Quality of education
surfers. (पैसों क� िक�त के चलते �श�कों से अनेकों काम करवाया जाए इस�लए �श�ा का �र �गरता है)
- WHO recommends India to spent 5% of GDP on healthcare. Yet we struggle to reach even 2.5%
- Human development index cannot improve. Vicious cycle of poverty continues.
24.6.3 Conclusion- money laundering

- Thus, Money laundering presents a significant challenge to India’s national security, the
government’s fiscal capacity, and citizens’ human development. The government has
implemented commendable/appreciable legal and administrative reforms to combat this issue.
However, the battle is not yet won, and we must continue to make every effort to address it
thoroughly. (मनी लॉ��गं भारत क� रा��ीय सुर�ा, सरकार क� �व�ीय �मता और नाग�रकों के मानव �वकास के �लए एक
मह�पूणर् चुनौती प्र�ुत करती है। सरकार ने इस सम�ा से �नपटने के �लए सराहनीय/प्रशं सनीय कानूनी और प्रशास�नक सुधार लागू
िकए ह�। हालाँिक, लड़ाई अभी जीती नहीं गई है, और हम� इसे पूरी तरह से सं बो�धत करने के �लए हर सं भव प्रयास जारी रखना चािहए)
24.7 BLACK MONEY: TIMELINE OF MAJOR EVENTS

Vodafone-CGT Case @SC 2012
Undisclosed Foreign Income & Assets Act 2015
Benami Transactions Prohibition Act 2016
Google Tax 2016
Demonetisation Nov 2016
Demonetization 8 Nov 2016
Direct Tax Code (DTC) Task Force 2017
GAAR 1 Apr 2017
GST starts 1 Jul 2017
Corporation Tax ⏬ (25-30% → 15-22%) 2019
PM CARES Fund 2020
Vivad se Vishwas Scheme for Direct Taxes 2020
DIVIDEND DISTRIBUTION TAX abolished 2020
Income tax: Optional Slab 2020
15th FC 1 Apr 2020
Tax Payers' Charter Aug 2020
- Global Minimum Tax 2021
- Retrospective tax abolished (Vodafone/Cairn)
Bitcoin pe 30% CGT, 1% TDS 2022
24.7.1 Black Money notable initiatives

To combat tax evasion To combat tax avoidance
(Refer to Prelims Handout for more) (Refer to Prelims Handout for more)
- Prevention of money laundering act 2002 General Anti-Avoidance Rules (GAAR) to give
(धनशोधन �नवारण अ�ध�नयम) Additional powers to the Income Tax officials.
- Undisclosed Foreign Income & Assets Act
(UFIA-2015) (अ�ात �वदेशी आय तथा प�रसं प��
अ�ध�नयम)
- Benami Transactions Prohibition Act
(BTPA- 1988, 2016) ((बेनामी लेनदेन (�नषेध)
अ�ध�नयम:)
Demonetisation-2016 & Operation Clean Retrospective Tax (but undone after Vodafone /
money Cairn case)
TDS and TCS on various transactions Global Minimum tax on companies engaged in
Base erosion and profit shifting (BEPS)
Limits on cash transactions:
1) Ban on Transactions of 2 lakh /or above in
cash
2) 2% TDS if More than ₹1 crore cash
withdrawn from your own account.
Electoral bonds to reduce the influence of cash
in election
Tax Information Exchange Agreement with
Switzerland and other countries.
24.8 🍋🍋🍋🍋🍋🍋🍋: � TAX TERRORISM / HARASSMENT
⇒ (Definition) Tax Terrorism / Harassment happens when tax authorities put undue pressure on
an honest taxpayer to pay more taxes or imposes disproportionate amount of penalty or jail for
minor offenses. Critiques have used this word in context of Vodafone & Cairn cases. (ईमानदार
करदाता पर टै� अ�धकारी अनाव�क दबाव / उ�ीड़न करे- उसे कर आतं कवाद या कर उ�ीड़न कहते ह�)
⇒ Direct Tax Code 2010 This bill aimed to replace the Income Tax Act, 1961
with simpler provisions. But, lapsed with 15th LokSabha dissolution in 2014.
Legal reforms ⇒ Authority for Advance Rulings on GST and Transfer Pricing.
⇒ Abolished Retrospective Tax Amendment (related to Vodafone/CAIRN
CGT Demand)
⇒ Ease in Paying taxes: variety of apps / portals : Aaykar Setu, ICEGATE
(Customs), ATITHI Mobile App (Customs) etc.
ICT reforms
⇒ Faceless assessment and appeal.
⇒ Document Identification Number (DIN: द�ावेज़ पहचान सं �ाक)
Surrender / - Vivad se Vishwas Scheme for Direct Taxes
settlement - Sabka Vishwas L.D.S Scheme for indirect taxes, namely Service tax and
Schemes: excise duty.
- Dispute Resolution Committee under Income Tax Act.
⇒ Tax payer’s charter (करदाताओ का अ�धकारपत्र) (Refer to Next Section)
⇒ Rajaswa Gyan Sangam workshops organised by CBDT & CBIC for idea
exchange between policy makers and senior tax officers. (�वचार/सुझावों के आदान
Misc. प्रदान के �लए)
⇒ 2016: Modi gave them RAPID Mantra: R for Revenue, A for Accountability,
P for Probity, I for Information and D for Digitization.
⇒ Tax Ombudsman (Refer to next section)
24.9 📯📯🍋🍋📜📜 TAXPAYERS’ CHARTER IN 💼💼 BUDGET-2020 (करदाताओ का अ�धकारपत्र)
A citizens’ charter (नाग�रक अ�धकारपत्र) is a document of commitments made by a government agency

to the citizens in respect of the services being provided to them.
⇒ e.g Dept of Post's citizen charter reads, "we'll deliver speed post anywhere in India by 4-5 days
→ELSE complain online to this website & we'll solve it → if not solved in 90 days then complain
to Postmaster General → then to Chief Postmaster General.”
⇒ Traditionally tax administrations paid limited attention to taxpayer service. पुराने जमाने म�/पारंप�रक �प
से कर-अ�धकारी "करदाता को अ�� सेवा देना" अपनी �ज�ेदारी नहीं समझते थे. घमं ड और बे�ख़ी से काम करते थे
⇒ However, Modern times → �demand for better services to the taxpayers → Govts across the
world, started framing charters and bill of rights for the taxpayers. हालांिक आधु�नक �व� म� इस प्रकार के
अ�धकार पत्र और कानून बनाए गए ह�
1986 UK charters for taxpayers (करदाताओं का अ�धकार पत्र) → more updated 2009
1991 - 1991: citizen charter system started in UK by PM John Major
- 1997: citizen charter introduced in Indian union ministries/departments.
(नाग�रकों का अ�धकार पत्र)
1988 USA Taxpayers’ Bill of Rights (करदाताओं के अ�धकारों का �वधेयक/कानून)
2007 Canadian taxpayers’ Bill of Rights
2020 💼💼 Indian Budget-2020: CBDT will declare a Taxpayers’ Charter. So, Tax payer
will easily know what services / complaint redressal mechanisms (�शकायत �नवारणतं त्र)
are available to him= ⬇taxpayer’s harassment (करदाता का उ�ीड़न)
24.9.1 📯📯🍋🍋📜📜 (Indian) Tax Payers' Charter released in 2020-Aug
It promises following things to taxpayers: करदाताओं को वादा करता है
1. You'll be treated in an impartial,courteous, professional manner. �न��, �वनम्र और पेशेवर तरीके से �वहार
2. You'll be treated/ presumed to be honest, unless there is a reason to believe otherwise. आपको
ईमानदार माना जाएगा।
3. We will provide complete and accurate information about rules & complaint mechanism etc a
timely fashion.�नयम/�शकायत दजर् कराने स��ी जानकारी
4. We will collect only correct amount of tax. (के वल सही रा�श ली जाएगी। ज़बरन �ादा रा�श नहीं ली जाएगी।)
5. We will respect your privacy and confidentiality �नजता व् गोपनीयता का स�ान
6. We will hold our officers accountable for their wrongful actions. अ�धका�रओ को गलत काय� क� सजा द�गे
7. You can appoint a representative / tax lawyer to file replies/complaints//cases on your behalf.
मामले दजर् करने के �लए एक प्र�त�न�ध / कर वक�ल �नयु� कर सकते ह�।
8. We'll reduce cost of compliance (e.g. number of forms to be filled, photocopies to be submitted
etc) अनुपालन क� लागत कम कर�ग-े फ़ालतू म� द�ावेज़ो क� दजर्नों कॉपी �नकालके फ़ॉमर् के साथ जोड़ने पड़े- एसे तमाशे बं द कर�गे.
9. +many other points but we have sufficient content for 250 words
It expects following things from taxpayers: Be honest, Pay taxes in time, Keep accurate records, be
informed, respond to notices in time when notices are given. (करदाताओं से �न� अपे�ा करता है क� वे ईमानदार
रह�, समय म� करों का भुगतान कर�, सटीक �रकॉडर् रख�, सू�चत रह�, समयसर नोिटस का जवाब द�)
24.10🍋🍋🍋: ��TAX OMBUDSMAN: INDIAN EXPERIENCE

‘Ombud’ is a Swedish term and refers to a person who acts as the representative or spokesman of
another person. 1809: The institution of Ombudsman was first created in Sweden- to look into
citizens grievances (लोकपाल/लोक प्रहरी- नाग�रकों क� �शकायतों के �नवारण के �लए)
2003 Direct Tax Ombudsman In India Started (प्र�� करों के �लए कर-लोकप्रहरी/�शकायत �नवारण अ�धकारी)
2011 Indirect Tax Ombudsman In India Started (अप्र�� करों के �लए)
2019 Above posts were abolished (दोनों पदों को समा� कर िदया)
24.10.1 😰😰problems in previous Ombudsman system (2003-19)?
⇒ Above ombudsmen were tax officers, who were given additional responsibility by the
government to inquire into grievances/ complaints against other tax officers. They did not have
independence from Senior officers/ministers. There was no separate law to empower them. (वे
�यं भी कर-अ�धकारी थे, कानूनन �प से कोई सता नहीं दी गई थी, इस�लए अ� अ�धका�रयों के �खलाफ �न�� प से जांच या
सजा कर नहीं पाते)
⇒ They could only settle the complaint through advice/mediation between the citizens and tax
officials. (मात्र सलाह/सुलह द्वारा �नपटान)
⇒ They could only offer a token compensation upto ₹5,000 to victim. Thus, failed to deliver any
result and both the posts were abolished in 2019. (पीिड़त को मुआवजे म� ब�त मामूली रकम दे पाते)
At present, Direct Tax Payer can complain to
Mode Organisation 😰😰Challenges?

Physical Aaykar Sewa Kendras Under Income It falls within the Income Tax Department so
Tax Department difficult to ensure impartiality. (यह इकाइयां आयकर
Online e-nivaran portal Under Income Tax �वभाग के अंदर ही है, इस�लए �न��ता मु��ल)
Department
Online CPGRAMS Portals (Central Public It looks into Complaints against all types of
Grievance Redress and Monitoring ministries and departments so long delay in
System) Under Ministry of resolution. (सभी मं त्रालयों क� सभी िक� क� �शकायत� देखता
personnel and training. है इस�लए काफ� देरी से जांच होगी)
24.10.2 🍋🍋🍋: ��Tax Ombudsman: Global experience

USA, Canada, Australia, Canada, UK, France, Brazil, South Africa etc Countries have separate
laws/mechanisms for setting up a tax ombudsman. So they can function independently without
undue pressure & without conflict of interest. (e.g. If the tax ombudsman's promotion/salary bonus
depends on the whims of IRS officer/Finance Minister then he'll not act impartially.) �बना िकसी के दबाव
म� या �बना िकसी िहतों के टकराव म� �न�� प से अपना कायर् कर सक� ऐसे कानूनी प्रावधान/सुर�ा दी गई
24.10.3 🍋🍋🍋: �� Tax Ombudsman: Conclusion / way forward (�न�षर्/आगे का रा�ा)

⇒ Tax Terrorism / Non-resolution of tax grievances discourage the taxpayers from being honest in
future. This encourages tax evasion, black money and parallel economy. (ईमानदार करदाता के साथ
अ�ाय हो तो वह भ�व� म� कर भरने के प्र�त उदासीन हो जाता है)
⇒ International experience suggests a tax ombudsman, with powers to investigate, punish &
compensate, is necessary for enforcing taxpayers' charter. (अंतररा��ीय अनुभव से प्रतीत होता है िक करदाता के
अ�धकार पत्र का अनुपालन वा��वक �प से करने के �लए एक कर-लोक प्रहरी होना चािहए- �जसके पास जांच, सजा और मुआवजा
देने क� सता हो)
⇒ Need of the hour is to set up this institution through a separate law, punitive powers, so as to
ensure its impartiality and independence and effectiveness. (अग्रता क्रम से सरकार ने एक अलग कानून द्वारा
इसे बनाना चािहए तािक �न�� तं त्र और प्रभावी �प से कायर् हो सके .)
24.11DEMONETIZATION (�वमुद्रीकरण यानी िक नोटबं दी)

⇒ 2016: ₹500 and ₹1000 notes demonetized. 2023: SC upheld the legality of this demonetization.
Refer to Prelims Handout or Win23 series.
⇒ 2023: ₹2000 notes gradual withdrawal by September 30, 2023.
⇒ Let’s go back and focus on demonetization of 500-1000 notes.
24.11.1 Demonetization – a failed experiment?

According to government, ₹ 3 lakh crores of Indian black money is stored in 500-1000 Notes (=2%
of GDP).
After the demonetisation, ideally this much black money should have been destroyed but 99% of
these specified bank Notes (SBN) came back in the system. So, how is it possible?
24.11.2 💸💸How did 99.30% SBN returned into banking system?

If the mathematical modelling was correct, then only 80% of the SBN should have returned back, &
20% SBN (presumed to be Black Money) should not have returned. But, Black money owners used
following tricks to deposit their SBN in bank accounts:
1. Businessmen / Politicians used their drivers, cooks, gardeners, personal staff members and
relatives as ‘money mules’. This is evident from exponential rise in the deposits in Pradhan
Mantri Jan Dhan bank accounts. (धनं ख�र/टट्ट� के �प म� इ�ेमाल िकया)
2. SBN were given out as “loans” to poor & as advance salaries to workers.
3. Agents who tied up with corrupt bankers who exchanged SBN without KYC verification.
4. SBN deposited in Cooperative Banks as back-dated Fixed Deposits, because Cooperative Banks
didn’t use Core Bank Solution (CBS) so it was possible to temper records.
5. SBN deposited in banks and then shown as income from sale of (fictitious) grain stock etc. So,
IT-dept can’t demand tax on it (and most state governments not levy tax on agricultural income
due to populism/vote bank politics). (फज� तरीके से आए को कृ �ष �ोत से आया �आ बताया)
6. SBN deposited in shell companies & shown as income from (fictitious) sale and invoices.
7. SBN donation to trust, temples & political parties with backdated receipts (and those entities are
exempted from Income Tax on their income.)…. And so on
24.11.3 💸💸99.30% SBN returned, but Demonetization not failed experiment because:
✓ Those who could not return their SBN, have lost their black money (₹ 10,720 crore)
✓ Those who used poor people are money mules- must have paid some commission to them. So
even if government did not get tax from black money, atleast poor people benefited. Thus,
indirectly demonetization helped in redistribution of wealth.
✓ Further, Operation Clean money, IT-dept issued notices to the suspicious bank accounts where
large amount of money was deposited. Such shell firms & their benami properties are seized.
✓ With Project Insight & Op. Clean Money: IT dept fetched ₹ 1.30 lakh crore in taxes and penalty,
attached ₹ 7000 crore worth Benami properties, ₹ 1600 crore worth foreign assets & de-
registered ~3.40 lakh shell firms. (says the Int-Budget-2019).
✓ The number of PAN card registration, IT returns, registrations under excise / VAT / GST have
greatly ⏫⏫ in the aftermath of demonetisation which proves that crooked people have
learned lesson. More than 1 cr. new IT assesses added in 2017.
✓ Tax collection ⏫⏫ from ~₹ 6 lakh crores (2013) to ~₹ 12 lakh crores (2018).
24.11.4 💸💸Demonetization: Impact as per Economic survey 2016-17

Area 😢😢 Short Term Challenges 🥰🥰 Long Term Benefits (दीघर् अव�ध के फायदे)
Banking Administrative challenges on Growth in the deposits → more loans can be given
the bankers to exchange the @cheaper interest rate, Less Cash economy &
banned notes, long queues associated benefits.
Real Estate Sale of houses ⏬ (मकानों क� Prices & rents of houses should ⏬.
�बक्र� म� �गरावट) Migrants will benefit.
Economy Job loss in cash-intensive Less-cash economy, digitization and formalization
at large sectors like diamond of economy, Bizmen getting GST registrations →
polishing, farm laborer, further surveillance → forced to show employees
MSME (बेरोजगारी) on paper → EPFO & ESIC benefits to worker.
Growth Slow down (�गरावट) Improvement (आ�थक वृ�द्ध दर म� बढ़ोतरी)
Self-Study for Mains IF YOU'VE TIME: Economic survey 2016-17 Vol1ch3, table 2 “impact of
demoneti..”
24.12BEHAVIOURAL ECONOMICS: IMPROVING TAX COLLECTION
⇒ behavioural economics is a field of study that combines economics and psychology.

⇒ It aims understand how and why people make decisions in the real world.
TRADITIONAL ECONOMICS BEHAVIORAL ECONOMICS
पार��रक अथर्शा� �भाव सं बं धी अथर्शा�
people are rational actors who make decisions People are not always rational. They are
based on a cost-benefit analysis / profit motive. influenced by a variety of factors, such as
(लोग नफे नुकसान के मुता�बक/ अनुसार �नणर्य लेते ह�) emotions, biases, and social norms. (भावनाओं,
पूवार्ग्रहों और सामा�जक मानदंडों के अनुसार �नणर्य लेते ह�. हमेशा
ता�कक और �ायो�चत �नणर्य नहीं लेते)
 Plato said, “What is honoured in a country, is cultivated there.” Indians join military because not
merely for salary, but because serving in the armed forces is considered ‘honourable’. (भारतीय युवा
फौज म� जाते ह� �सफर् तन�ाह के �लए नहीं ब�� इस�लए �ोंिक वह स�ाननीय नौकरी है)
 So, we should use the principles of Behavioral Economics to enhance tax compliance We’ve to
modify the social norm from “evading taxes is acceptable” to “paying taxes honestly is
honorable.” (�ावहा�रक अथर्शा� के �सद्धांतों द्वारा कर अनुपालन म� बढ़ोतरी कराएं . कर भरना एक स�ाननीय कतर्� बने)
 (Definition) Tax Morale: it is the motivation of taxpayers to pay taxes. (कर सं बंधी नै�तक मनोबल)
 When tax morale is � → motivation for tax evasion �.
Table 1: Tax Morale is affected by two types of fairness

Fairness Vertical Fairness Horizontal Fairness
�न��ता (उ�ार्धार �न��ता �ै�तज) (�ै�तज �न��ता)
Tax Payer’s What I pay in taxes is commensurate There should not be a great difference
thought to the benefits I receive as services in the taxes paid by the ‘similar’
process → from the Government. sections of society.
Fairness Vertical Fairness Horizontal Fairness
�न��ता (उ�ार्धार �न��ता �ै�तज) (�ै�तज �न��ता)
His Tax He sees taxpayers' money wasted in If a salaried employee and a
morale is public expenditure (like Mayawati’s shopkeeper are earning ₹8 lakhs per
lowered when elephant statutes) instead of better annum, still the salaried employee is
→ quality of water, road, education or forced to pay more taxes than this
electricity. shopkeeper, because
- TDS on salary whereas shopkeeper
underreports his sales in cash
payment.
- Shopkeeper shows less profit
through fictitious business
expenditures.
Solution(s)  under-constructions projects  SMS, billboards highlighting self-
should show signboards “Your tax employed individuals who pay
money at work” good amount of tax.
 Reminding tax payers that public  Public shaming of individuals who
goods can only be provided in don’t pay taxes. It’ll scare other
return for tax compliance. Most tax-evaders that the probability of
people in your local community their detection has increased.
pay their taxes on time.  Avoid Tax Amnesties. Give
stringent punishment to tax
evaders.
Further, ES19 suggested:
Top 10 highest taxpayers within a district → They should be given VIP-treatment such as faster
boarding privileges at airports, special “diplomatic” type lanes at immigration counters, fast-lane on
roads and toll booths, etc.
 Highest taxpayers over a decade → Important places should be named after them e.g. roads,
trains, schools, universities, hospitals and airports.
 In Hinduism, Islam and Christianity - unpaid debt is considered a sin. So, advertisements should
highlight how tax evasion is a violation of such “spiritual/religious norms”.
 Ease in Paying Taxes: Pre-populated Income Tax forms with easy to understand terms. Even if a
person’s tax liability is ZERO, he should be required to fill Income Tax form.
 Automated TDS as and where possible and timely release of Tax refunds.
@Hindi-Medium-Mains candidates: refer ES2018-19 Vol1 Ch.2 page52’s bullet
2.33 upto page 55’s box 5 to get the clean & formal vocabulary
24.12.1 🍋🍋🍋🍋 Tax: GDP: 15th Finance Commission on how to improve it?
⇒ Expand the scope of TDS/TCS to cover more number of transactions and find the tax
evaders. (�व�वध प्रकार के लेनदेन को टीडीएस/टीसीएस के दायरे म� लाया जाए तािक कर चोरी पर �नगरानी रखी जा सके )
⇒ 40% of the people who filed Income Tax forms in 2019-20 did not pay any income tax. Because
either: (आयकर का फॉमर् भरने वाले 40% लोग असल म� आयकर नहीं जमा करते �ोंिक…..)
o the taxable income was very low (आयकर यो� आय ब�त कम है)
o they are hiding / underreporting income (आयकर फॉमर् म� कु छ आमदनी को छु पाया जा रहा है)
o because of tax-deduction & tax rebates. (वह �व�वध प्रकार के टै� िडड�न, टै� �रबेट का लाभ लेकर
अपने आयकर दा�य� 0 कर देते ह�)
o So, Government needs to address this. इस�लए �व�ा म� सुधार ज�री
Income Tax Rate Minimum Maximum Income Tax Rate Minimum Maximum
UK 20 45 Brazil 7.5 27.5

USA 10 40 Japan 5 45
Sweden 20 25 China 3 45
Australia 19 45 India, Indonesia 5 30
⇒ Article 276: Presently Constitution does not allow the state government to demand more than
₹2500 rupees per year as professional tax. Union government should amend the constitution to
increase the limit. 14th FC recommended ₹12,000 per year. (रा� सरकारों को �वसाय कर वसूलने क�
सं �वधान म� जो सीमा दी गई है उसे ढाई हजार से बढ़ाकर 12000 प्र�त वषर् िकया जाए)
⇒ Presently GST has four slabs 5-12-18-28. Rationalize it into just three slabs for more efficient
administration & relief to taxpayers (जीएसटी क� दरों क� सं �ा को कम िकया जाए)
o Merit rate (5%)
o Standard rate (by merging 12-18% slabs into a single figure may be 15-17%)
o Demerit rate (28-30%)
⇒ Govt should � decrease the overreliance on indirect taxes (e.g. raising excise/VAT on petrol-
diesel). Increase the coverage of direct taxes of Union and State. (सरकार ने �व� प्रबं धन के �लए परो� करो
पर अपनी �नभर्रता को थोड़ा कम करना चािहए, प्र�� करो का �ाप बढ़ाना चािहए)
24.12.2 👋👋👟👟Conclusion- Black Money
To become a developed nation by 2047, India has to invest huge amount of money in education,
skill, infrastructure and healthcare. Government cannot do this, with a poor tax:GDP ratio.
Therefore, the need of the hour is to address the issue of black money and money laundering
urgently/on war-footing. (2047 तक एक �वक�सत रा�� बनने के �लए भारत को �श�ा, कौशल, बु�नयादी ढांचे और �ा� सेवा
म� भारी मात्रा म� धन �नवेश करना होगा। खराब कर:जीडीपी अनुपात के साथ सरकार ऐसा नहीं कर सकती। इस�लए, समय क� मांग है िक
काले धन और मनी लॉ��ंग के मुद्दे को त�ाल/युद्ध �र पर सं बो�धत िकया जाए)
24.12.3 ✍🏻🏻 Mock Questions for UPSC Mains (250 words each)
1. (PYQ-GSM3-2021) Discuss how emerging technologies and globalisation contribute to money
laundering. Elaborate measures to tackle the problem of money laundering both at national and
international levels. चचार् क��जए िक िकस प्रकार उभरती प्रो�ो�गिकयाँ और वै�ीकरण मनी लॉ��गं क� सम�ा म� योगदान
देते है। इनसे �नपटने के �लए रा��ीय व वै��क �र पे उपायों को �व�ृत क��जए।
2. (PYQ-GSM3-2013) Money laundering poses a serious threat to country’s economic sovereignty.
What steps are required to be taken to control this menace? मनी लॉ��गं देश क� आ�थक सं प्रभुता के �लए एक
गं भीर खतरा है। इस खतरे को �नयं �त्रत करने के �लए �ा कदम उठाए जाने क� आव�कता है?
3. Despite being a trillion dollar economy, India's tax to GDP is quite low. Suggest ways to remedy
this contrast. (िट��लयन डॉलर क� अथर्�व�ा होने के बावजूद, भारत का कर:जीडीपी अनुपात काफ� कम। इस �वषमता को हल
करने के उपाय सुझाए).
4. Suggest innovative measures to improve the Tax:GDP ratio for India. (भारत के कर:जीडीपी अनुपात को
बेहतर करने के �लए नवीन उपाय सुझाए)
5. Discuss the significance of taxpayers charter & tax ombudsman in the tax administration of
India. (भारत के कर-प्रबं धन म� करदाताओं के अ�धकार पत्र और कर-लोकप्रहरी/�शकायत �नवारण अ�धकारी के मह� क� चचार्)
6. What is retrospective taxation? Discuss provisions in Taxation Laws (Amendment) Act, 2021 in
this regard. (पूवर्प्रभावी/भूतल�ी कराधान �ा है? इस सं बंध म� कराधान सं शोधन क़ानून 2021 म� �ा प्रावधान िकए गए ह�?)
�Refer to Prelims Handout.
7. Discuss the rationale behind introduction of a global minimum tax. How will it help countries
like India? (वै��क �ूनतम कर क� शु�आत के पीछे तकर् पर चचार् कर�। यह भारत जैसे देशों क� कै से मदद करेगा?) �Refer
to Prelims Handout.
📑📑 Next Handout: Pillar2CD- Subsidies, Disinvestment, Deficit

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Mains QEP: Pillar2AB- Budget, Taxation, FC, Black Money

21 �� Pillar #2: Budget for Mains ........................................................................................... 136

21.2 Budget is bigger than economic horoscope of a nation ................................................................ 137

22 Taxes .......................................................................................................................................... 138

22.2 Tax Expenditure / Revenue Forgone (कर �य/प�र�� राज�)................................................................ 139

22.3 Taxation → GST ............................................................................................................................ 141

22.4 ��� GST: Challenges (चुनौ�तयां) ............................................................................................ 142

22.6 ��Mock Q for Mains from TAXES ........................................................................................ 144

23 Finance commission (�व� आयोग) ................................................................................................... 146

23.2 FC = Statistical job? ....................................................................................................................... 151

24 Black Money (काला धन, कर चोरी) ...................................................................................................... 154

24.3 Definitions related to Black Money .............................................................................................. 155

24.4 Money laundering & PMLA Act ................................................................................................... 157

24.5 Money Laundering / PMLA Challenges ........................................................................................ 157

24.7 Black Money: Timeline of Major Events ....................................................................................... 159

24.8 ����: � Tax Terrorism / Harassment ......................................................................... 160

24.9 ��� Taxpayers’ Charter in � Budget-2020 (करदाताओ का अ�धकारपत्र) ........................................ 161

24.10 ��: ��Tax ombudsman: Indian experience............................................................... 162

24.12 Behavioural Economics: Improving tax collection .................................................................. 166

21 💼💼💼💼 PILLAR #2: BUDGET FOR MAINS

21.1 DEFINITIONS / MEANING- FISCAL POLICY AND BUDGET

21.2 BUDGET IS BIGGER THAN ECONOMIC HOROSCOPE OF A NATION

21.3 BUDGET IS MEDICAL REPORT FOR COUNTRY’S FINANCIAL HEALTH

Health Indicator Budget Statements

22.1 TAX REFORMS IN RECENT YEARS (कर सुधार)

22.2 TAX EXPENDITURE / REVENUE FORGONE (कर �य/प�र�� राज�)

Some notable examples include:

– Tax holidays given in SEZ, GIFT City, to startup companies.

Income Tax Before After

Corporation Tax Before After 2019-Reform

22.2.2 👎👎Tax expenditure: negative aspects (नकारा�क पहलू)

22.2.3 👋👋👟👟Conclusion: Tax Expenditure / tax breaks

22.3 TAXATION → GST

22.3.1 Definition / Origin of GST

22.3.2 GST theory

22.3.3 GST technological solutions to reduce tax evasion

22.3.4 🍋🍋🍋🍋🍋🍋 GST: Charms (फ़ायदे)

22.4 🍋🍋🍋🍋🍋🍋 GST: CHALLENGES (चुनौ�तयां)

22.4.2 �😢😢Frequent changes harming long term business planning

22.4.3 📉📉📉📉 Random Fall in collection (आमद म� कमी)

22.4.4 🤯🤯Inconvenience to Small Traders (छोटे �ापा�रयों के �लए असु�वधा)

22.5 ✍ GST: CONCLUSION TEMPLATE (सार/�न�षर्)

22.6 ✍🎺🎺MOCK Q FOR MAINS FROM TAXES

23.1 FC – AN INTRODUCTION (एक प�रचय)

23.2 FC = STATISTICAL JOB?

- GSDP, poverty - Frequency of natural disasters

23.3 �(🍋🍋🍋🍋⚖�)⏰ FC: GIVING PERMANENT STATUS (�ायी दजार् देना)

23.3.2 �👌👌Argument in favour of giving permanent status to FC (प� म� तक)

23.4 ✍🏻🏻 MOCK QUESTIONS FOR MAINS: FINANCE COMMISSION

24.3 DEFINITIONS RELATED TO BLACK MONEY

24.5 MONEY LAUNDERING / PMLA CHALLENGES

24.5.1 😰😰Money Laundering: Global Challenges ( वै��क चुनौ�तयां)

24.5.2 😰😰Money Laundering: Legal Challenges (कानूनन चुनौ�तयां)

24.5.3 😰😰Money Laundering: Technological Challenges (प्रौद्यो�गक� क� चुनौ�तयां)

24.6.1 Threat to national security (रा��ीय सुर�ा के �लए खतरा)

24.6.2 Threat to human development (मानव �वकास के �लए खतरा)

24.6.3 Conclusion- money laundering

24.7 BLACK MONEY: TIMELINE OF MAJOR EVENTS

24.7.1 Black Money notable initiatives

22.4 �� GST: Challenges (चुनौ�तयां) ............................................................................................ 142

24.8 ��: � Tax Terrorism / Harassment ......................................................................... 160

24.9 �� Taxpayers’ Charter in � Budget-2020 (करदाताओ का अ�धकारपत्र) ........................................ 161