30 Apr. 24: In the midst of a heated political discourse surrounding social justice and economic welfare, recent data from the Finance Ministry has sparked concerns over the distribution of tax burdens in India. The provisional figures reveal a notable surge in personal income tax collections, juxtaposed against a decline in corporate tax revenues. This disparity underscores a growing trend where personal income tax constitutes an increasing portion of the country’s tax revenue, reaching a new peak of 28% as of February 2024.
The shift in tax composition is further accentuated by the dwindling share of direct taxes alongside the ascendance of indirect taxes. Direct taxes, known for their progressive nature, are levied directly on individuals and corporations based on their income levels. In contrast, indirect taxes, such as union excise duties and the Goods and Services Tax (GST), impose a uniform burden on all consumers regardless of income.
Notably, data analysis reveals that a significant portion of personal income tax filers fall within the annual income bracket of ₹1 lakh to ₹5 lakh, highlighting the contribution from middle-income earners. Comparisons with other BRICS economies underscore India’s relatively high effective personal income tax rate, adding another layer to the discussion on tax equity and fiscal policy.
The overarching concern revolves around the shifting tax burden towards middle-class and lower-income citizens, fueled by the rise in personal income tax and indirect taxes. Against the backdrop of ongoing political debates, including discussions on inheritance tax and socio-economic inequalities, the data serve as a focal point for policymakers and stakeholders alike to reevaluate taxation strategies and ensure equitable distribution of fiscal responsibilities.
