The taxes in India are just plain nonsense - Here's why
India's tax structure, especially for middle- and high-income earners, often feels burdensome due to the combination of direct and indirect taxes. Income tax, which is progressive and rises significantly with higher income levels, is the first layer of this taxation system. For individuals earning around ₹25 lakhs annually, roughly ₹5 lakhs (or 20%) might be paid in income tax, a substantial portion of their earnings.
The high-income tax rate ensures that wealthier individuals contribute proportionally more to the country’s revenue. However, this creates a sentiment among many taxpayers that they are spending a considerable amount of their work year simply meeting tax obligations, reducing their disposable income and sometimes leading to frustration over how their taxes are spent.
In addition to income tax, the Goods and services Tax (GST) adds another layer of taxation. GST is levied on nearly every purchase made in India, from essential commodities to luxury items, effectively increasing the cost of living. GST rates range from 5% for essential goods to 28% for luxury goods, meaning that a substantial portion of an individual’s income goes towards consumption taxes.
For instance, if someone makes purchases in the higher tax bracket, they are effectively paying an additional tax on top of their income tax, pushing their effective tax rate well over 30%. This cumulative effect of direct and indirect taxes can be particularly straining for middle-income earners, who feel the impact of consumption taxes more than higher-income individuals due to their spending patterns.
The high-income tax rate ensures that wealthier individuals contribute proportionally more to the country’s revenue. However, this creates a sentiment among many taxpayers that they are spending a considerable amount of their work year simply meeting tax obligations, reducing their disposable income and sometimes leading to frustration over how their taxes are spent.
In addition to income tax, the Goods and services Tax (GST) adds another layer of taxation. GST is levied on nearly every purchase made in India, from essential commodities to luxury items, effectively increasing the cost of living. GST rates range from 5% for essential goods to 28% for luxury goods, meaning that a substantial portion of an individual’s income goes towards consumption taxes.
For instance, if someone makes purchases in the higher tax bracket, they are effectively paying an additional tax on top of their income tax, pushing their effective tax rate well over 30%. This cumulative effect of direct and indirect taxes can be particularly straining for middle-income earners, who feel the impact of consumption taxes more than higher-income individuals due to their spending patterns.