While addressing the people at the inauguration of the Kollam bypass in January 2019 the Prime Minister of India mentioned that the culture of wasting public money should end. Earlier in February 2018 at the Global Business Summit in New Delhi, he had said that his government will take strict action against financial wrongdoings and not bear loot of public money. However, the reality is different from big talks. One excellent proof for this is that the huge amount of public money is being utilized in paying income taxes of cabinet ministers that accrue on their income. This scenario is present in various states of India. Yes, it is an unjustifiable treat for the ministers.
Let us look at the first episode. The public of Andhra Pradesh and Telangana, besides paying the salaries of their cabinet ministers including the chief minister, also pay the tax that accrues on those salaries. The monthly salary of the Chief Minister of Telangana is Rs 4,10,000 per month, and his counterpart in Andhra receives Rs 3,35,000 per month. Moreover, taxpayers also pay for their accommodations, convoys, and other perks and pleasures. Respective departments of the two states have lately published a series of government mandates releasing sums of money for disbursement of the tax dues of these elected representatives for the financial year 2020-2021.
The income tax liability of Rs 7,14,924 was payable by the Chief Minister of Andhra Pradesh YS Jagan Mohan Reddy on the taxable income he got from the government during the fiscal year 2020-2021.
On March 18, 2021, the General Administration Department published an order discharging the liability. The income tax liability of Rs 2,91,096 payable by Perni Venkataramaiah, the Minister for Information and Public Relations, was also paid off using public money.
Similarly, the government of Telangana is also liberal with the public's money. On January 29, the order had been issued by the Department of Agriculture to settle the income tax liability of Rs 87,984 payable by S Niranjan Reddy. On February 23, the Department of Health, Medical, and Family Welfare sanctioned Rs 2,16,938 towards the income tax liability of Health Minister Eatala Rajender. On February 24, the Industries and Commerce Department settled the income tax of Rs 1,66,670 payable by its minister, KT Rama Rao.
According to the provisions of the Payment of Salaries and Pensions and Removal of Disqualification Act, 1953, of Andhra Pradesh and Telangana, the government should settle the tax liability on the incomes of ministers including the chief minister. At the time of the introduction of this law, the salaries and rewards of elected legislatures were much more reasonable. However, over the decades, successive governments have increased the salaries of elected representatives through legislation. Every new government makes revisions of the salaries apart from paying perks and allowances.
According to the retired Telangana administrator and legal specialist Mohammed Shafiquzzaman, the amount settled as income tax on behalf of cabinet ministers would also be taken into account as income, and that is again accountable for tax. These heavy pay packets are segregated into taxable income and non-taxable allowances and perks and what has been disclosed in the taxable section is much less. Despite this, the ministers are not ready to pay tax, and this is completely intolerable.
The second episode is about Madhya Pradesh. In the year 2020, the government of Madhya Pradesh decided to pay the income tax on the salaries of serving chief ministers and the council of ministers. The government has taken this decision regardless of being under substantial debt and observing its finances stressed by the deadly coronavirus pandemic.
Due to the harsh economic influence of the Covid lockdown, the Shivraj Singh Chouhan administration had previously stopped salary increases for all government employees. It had also suspended a share of the Dearness Allowance and arrears due from the seventh Pay Commission. However, nothing has changed for the ministers and they received a monthly salary of Rs 1,70,000 including allowances. Besides, the State has just released funds to pay their income taxes, and it amounts to Rs 1.8 crore. The government released Rs 41.79 crore for their tours, hospitality, and travel needs and Rs 94.85 lakh towards the salaries and other expenses of former chief ministers. It has also raised its share in the Contributory Pension Fund Scheme for IAS, IPS, and IFS officers - from 10 per cent to 14 per cent. But the share has not been increased for government employees and retained at 10 per cent.
The Madhya Pradesh state treasure started shouldering the tax burden of all ministers, along with the parliamentary secretary, with retrospective effect from April 1, 1994. Now the opposition, which introduced the policy, has opposed the scheme and termed it shameful. One of the Congress leaders mentioned that even pensioners pay their taxes but politicians who assert to do social service are not paying, and we condemn this.
The story of Punjab begins here. The government of Punjab in August 2019, passed the bill to liberate the serving and opposition ministers from the responsibility of paying income tax on their perquisites such as residential bungalows. However, their salaries and other allowances will sustain to be taxed.
The Shiromani Akali Dal leader Bikram Majithia raised the flag against this and said that since the state was already in deprived financial condition, the pressure of paying tax on the perks of the ministers should not be imposed on the government. The big anomaly is the Chief Minister's tax liability on perks was higher than his salary. The CM's annual salary was Rs 3 lakh, but his income tax liability on perks had been pegged at Rs 17 lakh! According to the provisions of the East Punjab Ministers' Salaries Act, 1947, the Punjab government had been paying taxes on salaries, allowances, and several perks of the ministers till its amendment in 2018.
A few days back, in a nightmare of development, an investigation has exposed that several Members of Legislative Assembly and Legislative Councils have been found evading their tax bills as the state has been disbursing their income taxes. The investigation exposed many names across party lines, such as the Congress, Shiromani Akali Dal, and even the Aam Aadmi Party.
Here is the saga of Uttarakhand. Even after 19 years of being sliced out of Uttar Pradesh, Uttarakhand continued the practice of paying income tax liability of cabinet ministers from the hill state's treasury. In 1981, the custom of the state exchequer paying the tax liability of the chief minister and as well as other ministers was started after the Uttar Pradesh Ministers (Salaries, Allowances, and Miscellaneous Provisions) Act came into effect. The justification given at the time was that these ministers were poor and cannot pay income tax from their small earnings.
The state of Uttarakhand has had many chief ministers like Nityanand Swami, Bhagat Singh Koshyari, Narayan Dutt Tiwari, BC Khanduri, Ramesh Pokhriyal Nishank, Vijay Bahuguna, Harish Rawat, and Trivendra Singh Rawat and the government has been settling taxes for them all. Remarkably the ministers and MLAs in Uttarakhand get heavy salary packets. In 2018, the BJP government had also modified the salary packets of its ministers and MLAs. Approximately, the monthly salary of a minister is Rs 4.4 lakh while it is Rs 2.75 lakh for an MLA. However, in October 2019, the cabinet decided that from now onwards ministers have to settle their tax obligation.
The horror story of Uttar Pradesh starts here. In 2019, the government of Uttar Pradesh decided to erase the almost 40-year-old tradition of the state exchequer, settling the tax bills of its ministers. The tradition began in 1981 when VP Singh was the chief minister of the State.
Several chief ministers who were benefitted from this law and saved their taxes have been from across political parties including Yogi Adityanath, Mulayam Singh Yadav, Akhilesh Yadav, Mayawati, Kalyan Singh, Ram Prakash Gupta, Rajnath Singh, Sripati Mishra, Vir Bahadur Singh, and N D Tiwari. After a news report made this disclosure, many politicians said they were not even aware of it. A senior finance ministry official mentioned that for the financial year 2018-2019, the state government has paid Rs 86 lakh as the ministers' tax liability.
The tale of two states Haryana and Jammu & Kashmir, which has carved out of Punjab begins here. Before Punjab, the state of Haryana had passed the Haryana Salaries and Allowances of Ministers Act, 1970 and according to which the tax obligation on the salaries and allowances of its cabinet ministers would be assumed by the State government. This rule applies to even the members of Haryana's Legislative Assembly.
In 1956, the law was enacted by the state of Jammu and Kashmir relating to salaries and allowances of its ministers including ministers of state. In 1957, another law had been introduced about salaries and allowances of its second-in-command ministers. Both these laws were amended in 1981 to declare that any income tax payable by these representatives on their official salaries or allowances or any increment to the income tax payable by them due to their official salaries or allowances would be disbursed by the government. Importantly, the Fifth Schedule of the Jammu & Kashmir Reorganisation Act 2019 stipulates that these two rules will remain in force even after the restructuring of the state into two union territories comes into force on October 31, 2019.
To conclude, the above horrible stories reveal the state government-sponsored travesty. When everyone is taking a cut at source (Tax deducted at Source), our representatives cannot be blessed with undue advantage. This is against the philosophies of natural justness. It is not only immoral to settle the tax of minsters who have already received money for the services rendered by them, but it is also technically faulty because the income tax by the government for any person is a prerequisite and is again taxable. At a time when India is handling a problematic economic condition due to the fatal coronavirus pandemic, VVIP treatment to elected representatives continues to exploit the common man’s funds.
(The writer is a tax specialist, financial adviser, guest faculty and public speaker based in Goa)
