Report: How Few People Pay Income Tax in India

people pay income tax india

Our country has a major problem of Income-tax payment, barely a limited number of individual and families paid their tax fairly on their earned Income.

As reported, only a 12.9 million Indians (individuals and families) paid income tax in year 2011. The accurate data has been released recently by the Central Board of Direct Taxes that says nearer 2.7% of the 474 million people of workforce and in terms of national population only a bit more than 1% of the 1.2 billion population did the payment of tax. Overall the total of 29.4 million Indian fairly declared any income to that year.

In the U.S.,in comparison to the Indian stats that year 88.6 million households paid their federal income tax in 2011, or nearly 55% of those who might have owed income tax, the stats have been estimated by a think tank in Washington D.C., called the Tax Policy Center. The remaining 74.8 million population either didn’t file their income tax or didn’t owe any income tax, However, many likely paid for Social Security and Medicare payroll taxes which has been collected in the United States. and the population figure of U.S. was equivalent to the quarter of India’s population in 2011.

The enormous share of India’s economy that is informal and a few year ago, it is estimated that 84% of the country’s workforce was employed and not paying any Income taxes. The country rapid growth was also not favorable that government also struggling to collect what it owed.

The new data shows decrease in the share of annual output that the central government collects in the form of Income tax collection from 6.3% in 2007 to 5.5%. In rich countries, according to the World Bank, the average share of income tax is 11.4%.

The latest data don’t say as much as some would like to know about another aspect of India’s recent economic development: income inequality.

Thomas Piketty of the Paris School of Economics is famous for using information from tax returns to study the top incomes in various large nations over the past century. In India, he and his fellow economist Abhijit Banerjee have found the share of national income accrues to the richest population and steadily increased since the 1980 to the 2000 thereafter, Indian government stopped the publication of the detailed tax data.

Mr. Piketty petitioned the administration to release more data about the income, when he visited India earlier this year. But the latest data, which issued to him seems partly in response, include figures for just one year, the one that ended to the March 31, 2012.

Mr. Piketty wrote in an email to The Wall Street Journal that he and Mr. Banerjee don’t plan to update their earlier estimates of income inequality in India until the government puts out even more data.

“It is not enough to have solely the data” for one year, Mr. Piketty wrote, “especially given the many inconsistencies” in the government’s earlier figures. Those numbers seemed to become increasingly volatile in the late 1990s, he and Mr. Banerjee observed, particularly at the highest income levels.

Source: blogs.wsj.com