States should also have power to levy and collect imcome tax

According to the constitution of India income tax is a central subject and is therefore levied and collected by the centre. Central government has offices mainly in cities and large towns. On the other hand state governments have offices in every nook and corner. For example,Village Administrative offices are located even in remote villages. These offices issue various certificates including Income Certificate. So, it is easier for state governments to maintain records of people having taxable income. This data will enable Income Tax Offices to assess the income of individuals and demand the same immediately on knowing, which will help in minimising /eliminating need for raids.

Further, instead of the Central government alone collecting taxes and transferring part of the taxes to states, the states themselves can levy and collect income tax. In order that the people are not taxed too much, Finance Commissions can suggest maximum rates of tax to be levied by the Centre and the states which together should not exceed the present or reasonable level. This will be similar to GST which has central GST and state GST.

Tax should be exempted from income which is invested for productive, employment generating purposes like establishment of factories, transport companies etc. After all the governments to a large extent utize the tax income for generating employment etc.

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