Its return filing time. With demonetization last year, this year’s returns are crucial for the government in its quest to widen the tax base, increase the tax revenue, and generally drive people to be more honest with the government than they have been in the recent past. How will they do it? Brian Fernandes examines
Only 1.5% (1.9 Crore Individuals) of the Indian Population of 125 Crore pay income tax. Top 0.1% (23932) individuals account for 26% of the tax revenue. The 0.1% declare an income of over Rs: 1 Crore a year, 6.6% declare an income of Rs: 10 Lakhs to 1 Crore and 93.3% declare an income of Rs: 0 to Rs: 10 Lakhs a year.
The value proposition
Statistics show that Tax revenue has increased but the number of Tax payers has fallen. 93% of India is not liable for income tax they are either BPL or Farmers, or those earning less than Rs: 2.5 Lakhs a year and exempt from income tax by law. Also, professionals often declare less than they actually earn, paying a lower rate of income tax.
These statistics indicate 93 percent of the Tax payers are middle class. A middle class family in India in the Metros and tier II cities of India does need in excess of Rs: 50000.00 a month net of taxes to live fairly and put some away for a rainy day, which most families do. Saving for a rainy day is ingrained in them unlike in the west, where living is more day to day. That would boil down to a gross income of a little over 10 lakhs a year which would result in an income tax payout of around 25% overall, given the slabs in place.
The tragedy is that from the net income generated after income tax, families have to pay indirect taxes on almost all goods and services they buy or use (now GST) in the average range of 20 Percent - from soap to Life insurance premiums, from hospital bills to telephone bills and everything in between.
Thus the total incidence of tax on a middle class family in the range of 50 to 55% of his income. Incidentally even as the Central Government is promoting a cashless transaction culture post demonetization, sadly it has taxed those cashless transactions too.
This story is from the August 2017 edition of Karnataka Today.
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This story is from the August 2017 edition of Karnataka Today.
Start your 7-day Magzter GOLD free trial to access thousands of curated premium stories, and 9,000+ magazines and newspapers.
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