Income tax in India

Do you pay income tax in India? If yes, you are among 2% of India’s population that pays Income Tax.

India has a booming population. Spending in India has increased by leaps and bounds since globalization. Global brands in all fiends are keen to enter India and strengthen their presence here.

Indians are a brand crazy, mall crazy crowd. This crowd loves to flaunt their branded possessions, eat out in swanky restaurants, celebrate and party. Indian marriages and celebrations are expensive affairs. To meet these expenses, a family needs income from more than one job.

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Consider a middle class family in India. Their income will be a mix of monthly salary, rents, stocks, land and gold. For those who wonder how this is possible… read on.

In developed cities, At least one person in a family will have a job earning monthly salary. They will have a house and a vehicle. Upper middle class and high class families have many houses or other property, rented out bringing in additional income for the family. Indians also buy lands and gold as investment. They wait for several years for prices to increase, after which they sell their lands, gold etc for a good profit.

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In India’s manufacturing hubs (economically thriving small towns specializing in manufacturing or farming a product), a family’s earning is a mixture of salary, small scale trading or manufacturing, rents, commissions, etc.

This practical scenario contraficts official records that say only 2 % of India’s population has taxable income. The minimal taxable income in India is 2.5 lakh rupees per year. This means, a person with monthly income of 20,000 rupees pays a monthly tax of 1000 rupees. Does only 2% of India’s population earn above 20,000 rupees a month?

At least half of the population in India earn more than this… But, how much of their income is accounted for, is the question. Income from rents, commissions, trading, real estate etc is seldom officially documented. Only salaried income is on papers officially. There is no way to track and record all other forms of income, unless people voluntarily disclose it.

For ages, the Indian society has looked at paying tax as a honourable and rightful action. So what stops people from voluntarily disclosing their actual income and paying tax? Not one or two.. we have lots of reasons for this. Misuse of tax money by politicians and administrators, prestigious and iconic rise of tax evaders in social life, a plethora of taxes already imposed on the common man, etc.

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Every billed transaction in India comes with a tax,  So, a common man pays multiple taxes everyday in his daily life. From buying at the local supermarket, to banking transactions, eating out, online shopping, buying dress etc… every bill comes with it’s own tax, cess and service charges. In addition there are social taxes like Clean India tax, higher education tax, etc. High tax rates under the new GST system has further lowered public morale.

Do Indians benefit from these taxes? No… Indians do not see their tax money spent for the country.  Public infrastructure is not maintained or improved efficiently. The tax payer assumes that his tax money has been misused by corrupt administrators and politicians. So, why declare his actual income and pay additional income tax?

Successive governments in India campaign and advertise tax paying as every honest Indian’s duty. Branding tax paying as the right way of life will not help increase tax collection.

A transparent, win – win system without repetitive taxes, beneficial to both the government and tax payer, is the only practical solution.


Image sources: income tax, jewellery, tax chart.




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