When it comes to income tax in India, the salaried individuals, especially the ones who earn over 10 Lakh a year have to pay much higher taxes. Infact, the taxes are so high that they fork out some of the highest taxes in percentage terms.
According to recently released survey by PricewaterhouseCoopers (PwC), the take home salary (net salary after income tax and other deductions) of an high salaried Indian is much lesser as compared to their peers in other countries like US, UK Canada, China and Russia.
Among all the G20 countries Italy is the only country where they pay higher taxes. After income tax and other deductions, Indians take only 54.90 percent of their salary home. Compare this to United States, where salaried Individuals take 60.45 percent, Chinese take home 62.05%, Mexicans take home 70.60 percent, Russians take 87%, while Saudi Arabians take a whopping 96.86% back home!
Check out this graphic for G20 countries that will give you a better idea.
Please keep in mind that these numbers are for people earning salary of $400,000 per annum or above. Obviously, this applies to only a fraction of Indian population. But it still goes to show that when it comes t taxes, the more you earn the higher you have to pay.
In India, the tax structure is extremely skewed – Nearly 97 percent of Indians do not pay any taxes at all. For e.g: Only 3.24 crore people paid taxes in FY 2011-2012 in country with 125+ crore people.
Even more surprising fact is that only 1.3 percent (about 4 Lakh) Indian tax-payers contribute to over 63 percent of all income tax collected!
There is no doubt that India needs serious Income Tax reforms, and Government has been trying to do that by implementing Direct Tax Code among other things. The tax structure definitely needs to more uniform rather than skewed.
Another important aspect is that Indian tax structure is extremely complicated compared to most other countries. This needs to simplified, so it is easier for people to file taxes.
Would love to hear your thoughts on this!