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Old 13th April 2015, 09:06   #1
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Default Taxes: How much do we really pay the Government in India?

I have often found myself wondering the real rate of taxation on Indians. The total amount of money that goes out your pocket to the government in a year..

I thought about doing an experiment and cataloguing everything my family bought and calculating the exact taxation. But my knowledge of service tax, income tax, excise, sales taxes etc is limited and I tried to search for some study of this sort done by a consulting agency/NGO/university. I couldn't find any..

I would be glad if members in the know could shed some light and point towards resources for this kind of information.


There is an article on Blooberg business week today showing statistics for America.



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Some points to ponder :

1.About 30-35 % of a new Real Estate purchase from a developer goes to the government

2.30% or more of every new car purchase goes to the government

3.The government makes more money from tobacco sales than the organised tobacco companies.

4.Service tax + cess of about 13.2 percent on all kinds of services.

5.Fuel, tobacco, alcohol are the largest contributors to excise collections.


My guess is total gross taxation for someone in middle income 30% tax bracket, paying EMI for a car, a housing loan may cross 50%.
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Old 13th April 2015, 14:18   #2
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Default re: Taxes: How much do we really pay the Government in India?

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Originally Posted by drsingh View Post
My guess is total gross taxation for someone in middle income 30% tax bracket, paying EMI for a car, a housing loan may cross 50%.
I agree it could cross 50%. I would also like to solid data on this.

OT: I used to think it is the salaried class like us who has to pay the most. The amount of income tax the business class pay is miniscule compared to the size of business they run. Whatever government servants pay, part of it comes back to them as their salary.
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Old 14th April 2015, 12:10   #3
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Default Re: Taxes: How much do we really pay the Government in India?

When less than 3% of this country pays income taxes (source), what does one expect? Cars are heavily taxed, so is real estate. Service tax is about to go up soon. Look at the tax component of your food bill at a hotel the next time.

It's unfortunate that more Indians don't come forward & pay their income taxes. Until that changes, expenses will continue to be heavily taxed.
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Old 14th April 2015, 12:31   #4
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Default Re: Taxes: How much do we really pay the Government in India?

More than wondering how much I pay the government, I wonder what the government is doing about expanding the tax net so more people pay their taxes and I can stop paying for others who are enjoying their ill-gotten and unreported income at my expense.

3% compliance in a country that aspires to be a superpower is beyond ridiculous, and even the paltry (in a national context) sum this 3% pays is swallowed by corruption and/or hare-brained populist schemes.

Just saying it's unfortunate while continuing to screw the few % who actually pay up with ever-increasing taxes isn't going to work forever. What is to stop these honest (even if by compulsion) tax-payers from becoming tax evaders in the future when they see no light at the end of this bottomless tax-hole?

Last edited by Chetan_Rao : 14th April 2015 at 12:33.
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Old 14th April 2015, 13:15   #5
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Default Re: Taxes: How much do we really pay the Government in India?

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Originally Posted by Chetan_Rao View Post
More than wondering how much I pay the government, I wonder what the government is doing about expanding the tax net so more people pay their taxes and I can stop paying for others who are enjoying their ill-gotten and unreported income at my expense.
There are a few options like introducing transaction tax on banking. The major drawback with this is that cash transactions will become rampant and money will move away from the financial institutions.

The only thing we can do is avoid cash transactions, ask for a bill from the seller and avoid unbilled items to save on tax. Only then the businesses will be forced to pay tax.
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Old 14th April 2015, 14:37   #6
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Default Re: Taxes: How much do we really pay the Government in India?

Even fuels are not spared. Roughly 40% of the cost to us is tax.

Customs duties on almost all imports and most exports at different rates. Excise on alcohol constitutes major part of the cost.

Account also has to be taken of the entry taxes, VAT and cess.

Then thre are the stamp duties which are levied by the States. The municipal taxes, property taxes, the life is full of taxes.

Last edited by deepfusion : 14th April 2015 at 14:40.
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Old 14th April 2015, 15:52   #7
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Default Re: Taxes: How much do we really pay the Government in India?

If you were working in the 70s, you would have paid a mind-boggling 93% as taxes. (see http://www.moneycontrol.com/budget2007/taxrates.php) At least, now it is down to 30%.

Increasing the tax net can only be done if the Govt. has the courage to tax Agricultural income. Almost 30% of India's GDP is through agriculture. And that 30% is not taxed at all. On top of it there is large subsidies on fertilizers, electricty, water, seeds, diesel, generators etc. I think that almost 50% of the tax earned goes into the agriculture sector. Rich farmers are filthy rich and poor farmers are filthy poor. Govt should tax the rich farmers and provide relief to the poor farmers. Instead Govt. tax the hardworking middle class people of other sectors and provide subsidies to both rich and poor farmers.
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Old 14th April 2015, 16:06   #8
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Red face Re: Taxes: How much do we really pay the Government in India?

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Originally Posted by GTO View Post
It's unfortunate that more Indians don't come forward & pay their income taxes. Until that changes, expenses will continue to be heavily taxed.
Say that to a politician, bureaucrat, or a top businessman and see their faces cringe with despair. Today politicians are worth hundreds of crores and yet they aren't forced to pay taxes. Businessmen have stashed unlimited billions outside India and nobody bothers to book them. All the govt can think is squeeze the last drop from the 3% tax paying population and build their wealth base.

There was a report submitted by a NGO (I dont remember their name, had got on Whatsapp) where they recommended to do away with cash transaction as this is the main source of black money and non payment of taxes.
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Old 14th April 2015, 16:15   #9
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Default Re: Taxes: How much do we really pay the Government in India?

Its not just compliance alone that is responsible for only 3% people paying all the taxes. It has political considerations as well. Agricultural income is exempt from tax and India being a country where majority of people are still employed in agriculture, the 3% number will not improve significantly till agricultural income is also brought into the tax net. Imagine a regular joe in a Rs. 3-4Lakh per annum job in a city vs a farmer earning the same in a village. Why would you want to exempt the farmer's income from tax and not the city dweller's income whose living cost in the city is quite high, who doesnt get a safety net from the government like a minimum support price on produce, job guarantee like MNREGA, free electricity, subsidised fertilizer, farm loan waiver, reduced rate loan for a tractor (which doubles up as personal vehicle for farmers)?
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Old 14th April 2015, 16:24   #10
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Default Re: Taxes: How much do we really pay the Government in India?

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Originally Posted by ghodlur View Post
There was a report submitted by a NGO (I dont remember their name, had got on Whatsapp) where they recommended to do away with cash transaction as this is the main source of black money and non payment of taxes.
And how do they propose to implement this?
Govt's expenditures are anyway not done in pure cash.
And private dealing can anyway be done via some other suitable means of "currency" if not RBI notes.
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Old 14th April 2015, 16:53   #11
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Default Re: Taxes: How much do we really pay the Government in India?

For salaried class, they should give some discounts based on the amount of tax they pay. With no other earnings, they should get back something for paying direct tax

Without this indirect tax should take care of others. People have talked about tax on expenditure and make sure all transactions go through banking system. Its difficult though.
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Old 18th April 2015, 01:15   #12
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Default Re: Taxes: How much do we really pay the Government in India?

Hi everybody
Drsingh.
Thanks a lot for starting such a thread.

Winston Churchill :"Liberty is men's birthright. However, to give the reins of government to the Congress at this juncture is to hand over the destiny of hungry millions into the hands of rascals, rogues and freebooters. Not a bottle of water or a loaf of bread shall escape taxation; only the air will be free, and the blood of these hungry millions will be on the head of Mr. Attlee. India will be lost in political squabbles."
(Above from snopes.com. There are doubts about what he said but this is the widely held version.Prophetic words. Everything is taxed and in every conceivable way)

Somebody mentioned 93%. It was 97.5%( From business standard)
"In 1973-74 the highest tax rate applicable to an individual could have gone up to an astronomical level of 97.50 per cent!"

Regarding the debatable point of taxing agriculture income. It is not going to end. And the big question is who will bell the cat. I remember reading about Amitabh Bachhan and Amir Khan declaring themselves as farmers. This was about 7/8 years back.
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Old 18th April 2015, 01:41   #13
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Taxation on farmers is tricky. Every member of the family 'works' on the farm one way or the other. You're going to treat a whole joint family as an individual and tax their income?

Prices are not market linked and farmers cannot sell their produce without going through a middle man.

The government has given a statement that it cannot /will not set the MSP prices greater than 1.5 times the cost of production.

No true Long term loans available to farmers to build assets or set up alternative farm related businesses.

The 'rich' farmers you come across either have a large hereditary acreage or a windfall by land sale.

Indian Agriculture is a dead end, if something doesn't change.
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Old 19th April 2015, 19:31   #14
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Default Re: Taxes: How much do we really pay the Government in India?

Interesting thread - my two cents - remove taxes targeting certain section of people like salaried (bulk of 3%) and introduce or increases taxes which everyone needs to pay, like service tax and include more services in the net. This would ensure all people politicians, business men, farmers etc pay tax indirectly for example eating in a hotel.
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Old 20th April 2015, 16:54   #15
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Default Re: Taxes: How much do we really pay the Government in India?

Sorry chaps. You work for them, and they as a charity leave a small fraction for you. Remember at one time the Income Tax was 97% (or was it 93%).
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