It’s True: Indians Really Love Evading Income Tax

In his fourth budget speech, Finance Minister Arun Jaitley today (1 February) made some interesting revelations about tax payment in India.

Among the 3.7 crore individuals who filed their tax returns in 2015-16, 99 lakh show income below the exemption limit of Rs 2.5 lakh per annum, 1.95 crore between Rs 2.5 lakh and Rs 5 lakh, 52 lakh between Rs 5 lakh and Rs 10 lakh and only 24 lakh people above Rs 10 lakh.

Of the 76 lakh individual assesses who have declared an income of over Rs 5 lakh, 56 lakh are salaried. The number of people who have declared their income to be more than Rs 50 lakh in the country is only 1.72 lakh.

Now, compare this to the amount spent by Indians. In the last five years, more than Rs 1.25 crore cars have been sold, and the number of Indian citizens who flew abroad, either for business or tourism, was 2 crore in the year 2015.

What does this tell us? That India is a largely tax-evading society. We, as a nation, love to avoid paying taxes, which puts an unnecessary burden on those who do pay their taxes diligently.

The key reason for tax evasion is the prevalence of large volumes of cash-based transactions in our society.