[JayKis]

Double Post. Please Remove

[JayKis]

Originally Posted by Altocumulus

Interesting Calculations, however some observations on the 20L salary.

1. For HRA exemption of that amount the person needs to rent a place for 40k per month at least (since you would need to deduct 10% of basic for HRA exemption). Hardly anyone having a 20L salary would do that.
2. You have shown Home Loan Interest as well. That means a person needs to buy a house in a different city to get that benefit else he wont. Also that would require a loan of 25-28L to take that benefit of 2L for the initial years.
3. For other areas also he needs to invest the money, like NPS, Remaining 80C etc.

So at the end a person earning 20L, which I am sure you would agree is quite a lot in India, a person will be left with less than 60k in hand as disposable income. Add to this the amount for daily expenses, investments, etc. 20L doesn't seem that much then. I won't even go into the taxes imposed on them as well.

Was sure some one would bring this topic up though the direction to point out was that income taxes were really low in India.

Point No.1 is fair. 40K/month rent is on the higher side. We can take a more manageable 26K/month

Point No.2 and 3 could be explained with the comparison of the following three scenarios.

Scenario 1: No Investment in anything

• Hardly any differences in take home pay between 2014 and 2018.
• Tax rate is the highest but a very manageable 16.5/15.7%

Scenario 2: Investment in 80C and NPS (only for 2018)

• Take home pay is less in 2018 by 4375 per month. But the contributions to 80C and Pension fund amount to 8771 and should be considered savings.
• The income tax was lowered by an amount of Rs.3958
• Tax rate in 2014 was still 16.50 but 2018 has come down to 14.13

Scenario 3: Full Investment

• Take home pay is less in 2018 by 7292 per month. But the contributions to 80C and Pension fund amount to 8771 and should be considered savings.
• The income tax was lowered by an amount of Rs.5208
• Tax rate in 2014 was 14.25 but 2018 has come down to 11.13

Please note that in the first two scenarios the in-hand (post rent) is still above 1L+ whereas in the third it is 89K which is much higher than the estimated 60K (even after all investments)

Please note the tax rates in all the scenarios,a light 10-16%

[Altocumulus]

Originally Posted by JayKis

Please note the tax rates in all the scenarios,a light 10-16%

The numbers 10 and 16 may look like small numbers but they amount to a lot of money. What is the return that you get for paying for it ? What is the infrastructure, utilities, justice system, law and order, public transportation, safety, education etc you get for paying that ? Also the base here is 20L. The more salary, the percentage keeps on increasing because the investment deductions are limited to the amounts you mentioned.

Your location shows US and you mentioned you have been in different countries. I have had the opportunity to be in different countries as well. Can you see no difference in that or are government in these countries not human. Why does 3% people have to take the burden of 97% compared to 55% paying taxes in the US ?

Speaking of Belgium, you mentioned 50%, but you forgot to mention that is 50% after 48% (35+13) of you income goes into social security contributions for yourself. So that automatically brings down the tax percentage to 26% of your income based on your kind of calculations. Also upto 38080 Euros average tax is 37.5% of the amount which will bring the 26% down even further. Even if that brings down by 5% more, you will be paying 20-22% as tax. So are you saying by paying just 5-7% more I will get the same facilities as a Belgian Citizen would get in his country. I wish that was the situation, and I would have happy paid it.

In my opinion, I am paying 8-10 times more than what I should. After demonetization it was promised honest taxpayers to receive benefits. 2 budgets later effectively I will be paying even more thanks to the increase in cess. And as an automobile enthusiast, keep paying more for petrol. I pay huge amounts as roadtax. I pay toll, I pay GST, I pay necessary fees and then multiply the fees a few times more as bribe. So whatever I pay is anything but light.

Another way of looking at it is, average salary hike in India is 9% which is optimistic for quite a few. Inflation is at around 5%. If 30% plus cess of my 9% hike goes in Tax, effectively I am left with a hike of a little more than 1% in my earnings value. Very crude calculation, but it's the truth. Afterall companies do factor in inflation as a major component for hikes.

[vishnurp99]

Just thinking out loud, Do you think there is any chance of doing a 1 day planned leave by the entire salaried population of the country as a protest? Any chance that this could work. How many forumers would support something like this?

You don't get anything in this country without fighting for it

[Altocumulus]

Originally Posted by vishnurp99

Just thinking out loud, Do you think there is any chance of doing a 1 day planned leave by the entire salaried population of the country as a protest? Any chance that this could work. How many forumers would support something like this?

You don't get anything in this country without fighting for it

How will that help ? Why do you want to penalize the company which is paying you salary ? One day leave across the country is a huge dent on their earnings/operations and maybe in many cases loss of reputation.

[Sawyer]

Originally Posted by ritz3645

From my experience the HR at Pvt companies leave no stone unturned to avoid taxation to their employees. Heck the HR maze to avoid PF is a starting stone for any Pvt companies employees. So State and Center government employees do also form a huge chunk of direct tax base.

It isn't correct to generalise from a few experiences about private companies. When taxes on salaries came down to present levels more than a decade ago, and when at the same time the IT department started actively investigating tax evasion in TDS by corporates with consequences having to be faced by Directors, many companies cleaned up their acts, and took the route of full compliance with TDS. Some even raised the salary level on a one time basis to compensate employees for this one time effect. Companies have better things to do than respond to an IT investigation into their TDS practices. Avoiding PF cannot be equated with helping employees evade TDS. That is allied to other actions taken to avoid unions etc. to allow for better business operations.

Yes, the government employees also suffer TDS. But the effective burden is usually lower because of three non taxable items: tangible perks, intangible perks and illegal perks. And they also are a source of grievance because even in the best managed government departments, the overstaffing and general air of lethargy is still very evident.

Originally Posted by JayKis

Was sure some one would bring this topic up though the direction to point out was that income taxes were really low in India.

Human nature decides satisfaction in a relative way, comparing oneself to people around. And to people in the vicinity that are visible, compared to those in other countries that are an abstraction.

My tax burden may be 20%, that of someone in the US maybe 30% and someone in Sweden may pay 50%. But if my neighbour pays only 10%, that bothers me. Human nature can't be reasoned away.

The fact that in turn I get no or poor returns is a double whammy. No reasonable Indian expects soft and hard infrastructure of the Swedish standard, but everyone resents the quality of that served up to us. Add to that the immense visible waste of taxes collected by those collecting the tax as a reason for this poor quality. Further add to that the fact that all that the salaried can do about this state of affairs is to crib about it, knowing that it won't make a difference in the outcome.

The only realistic escape route is to escape the TDS on salaries jail. Or, be philosophical about life and enjoy whatever is available.

[vishnurp99]

Originally Posted by Altocumulus

How will that help ? Why do you want to penalize the company which is paying you salary ? One day leave across the country is a huge dent on their earnings/operations and maybe in many cases loss of reputation.

Just thought that it will convey the angst that salary population generally feel as a group.There will be some loss of reputation but it will mostly be a loss of reputation at a country level rather than a company level.

This is not practical though. So will drop this thought. Having said that i agree that the smart ones will create their own means of getting incomes which can be enjoyed without tax.

The other option is something that i see a lot of my friends take - Migrate to another country like canada. Of course you may end up paying more taxes, but atleast you don't have to see your friendly neighbour living in a palatial house and driving a Mercedes and who pays lesser income tax than you. You also get better infrastructure, cleaner air etc.