Inside the Tax Revenue..
The budget has been released and as usual some benefits were given and some new taxes imposed. Some of the announcements are still in proposal stage (eg. taxation of non-equity mutual funds) and may be re-considered for clarity on implementation timelines, while others (such as raising of basic exemption to Rs.2.5Lacs) are final. It is argued that India is one of the lowest tax-to-GDP ratio countries and more needs to be done to widen the tax net. A look inside the tax revenue stats reveals some startling data points for us to ponder.
Number of Tax Payers in India & their Slabs
Slab No. of assessees (in lakhs) Percentage of taxpayers
0-5 lakh 288.44 89.00%
5-10 lakh 17.88 5.50%
10-20 lakh 13.78 4.30%
>20 lakh 4.06 1.30%
From the above table, it is evident that amongst the 3.3 crore tax payers, a good 90% falls within the lowest tax bracket of Rs.0-5lakhs income. And just 1% of the assessees earn more than Rs.20lakhs. Infact there are only 43,000 assessees earning more than Rs.1crore (in a country of 120 crore) per the released data.
Tax Collection by Tax Slabs
Slab (Rs. in crore) Percentage of tax collected
0-5 lakh 15,010 10.10%
5-10 lakh 21,976 14.80%
10-20 lakh 17,858 12.10%
>20 lakh 93,229 63.00%
It is interesting to observe that 90% of the assessees pay up only 10% of the total tax revenue, while 1% of the (super-rich) assessees that earn >Rs.20Lacs contribute to 63% of the total tax collected. This data reveals the income inequality prevalent in the system and also makes one wonder whether the tax slab itself requires re-laddering. For instance 0-5Lacs (0% tax), 5-10Lacs (10% tax), 10-20L (15% tax), 20-30L (20% tax), 30-50L (30%), 50L-1crore (40% tax) and >Rs.1crore (50% tax). This approach might ensure that the tax net is first deepened and discourage creating huge gaps in worker-to-CEO pay ratios. As for widening the tax net there is no shortage of proposals, but only a severe shortage of will to implement them.
On the other side, in the corporate world the same story prevails. Per Mint, companies that make profits upto Rs.10 crores pay a higher effective net tax of 26% while those that make >500crores pays only 20% effective net tax (after allowable deductions), paving the way for wealth accumulation only for the super-wealthy. Hopefully the new government's approach of PPP model for development would restrict gifting of the country's natural resources to a handful of elite companies and ensure that the nation's wealth is not funneled to the top rungs at all times!
Number of Tax Payers in India & their Slabs
Slab No. of assessees (in lakhs) Percentage of taxpayers
0-5 lakh 288.44 89.00%
5-10 lakh 17.88 5.50%
10-20 lakh 13.78 4.30%
>20 lakh 4.06 1.30%
From the above table, it is evident that amongst the 3.3 crore tax payers, a good 90% falls within the lowest tax bracket of Rs.0-5lakhs income. And just 1% of the assessees earn more than Rs.20lakhs. Infact there are only 43,000 assessees earning more than Rs.1crore (in a country of 120 crore) per the released data.
Tax Collection by Tax Slabs
Slab (Rs. in crore) Percentage of tax collected
0-5 lakh 15,010 10.10%
5-10 lakh 21,976 14.80%
10-20 lakh 17,858 12.10%
>20 lakh 93,229 63.00%
It is interesting to observe that 90% of the assessees pay up only 10% of the total tax revenue, while 1% of the (super-rich) assessees that earn >Rs.20Lacs contribute to 63% of the total tax collected. This data reveals the income inequality prevalent in the system and also makes one wonder whether the tax slab itself requires re-laddering. For instance 0-5Lacs (0% tax), 5-10Lacs (10% tax), 10-20L (15% tax), 20-30L (20% tax), 30-50L (30%), 50L-1crore (40% tax) and >Rs.1crore (50% tax). This approach might ensure that the tax net is first deepened and discourage creating huge gaps in worker-to-CEO pay ratios. As for widening the tax net there is no shortage of proposals, but only a severe shortage of will to implement them.
On the other side, in the corporate world the same story prevails. Per Mint, companies that make profits upto Rs.10 crores pay a higher effective net tax of 26% while those that make >500crores pays only 20% effective net tax (after allowable deductions), paving the way for wealth accumulation only for the super-wealthy. Hopefully the new government's approach of PPP model for development would restrict gifting of the country's natural resources to a handful of elite companies and ensure that the nation's wealth is not funneled to the top rungs at all times!
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