Is The Current Tax System Really Fair or it Becoming Too Harsh?

Is The Current Tax System Really Fair?

Everyone works hard to earn money, and it is one of the most difficult things in life. People put in their blood, sweat, and time to make a living, yet the money they earn is already reduced through Tax Deducted at Source (TDS) even before it reaches them.

The major sources of income are salary, business, and capital gains. In the case of salaried employees, TDS is deducted before they even receive their salary. If a person earns more than ₹12.75 lakhs, they become liable to pay income tax, and if they earn more than ₹24 lakhs, they may fall into the 30% tax bracket. That means out of every ₹100 earned, around ₹30 goes toward taxes. People study hard, work long hours, and make sacrifices to earn more, yet a significant portion of their income is paid as tax.

If a person starts a business and works hard to achieve a turnover of ₹5 crores, they may have to pay around ₹90 lakhs to the government in the form of GST, irrespective of whether they actually made a profit or incurred a loss. Even if the business only breaks even, the owner may still have to file an income tax return, undergo a tax audit, and pay an auditor around ₹30,000 to ₹40,000 just for compliance.

Similarly, if a person spends years learning and investing in the stock market and earns ₹20 lakhs as short-term capital gains, they may have to pay 20% tax, which comes to nearly ₹4 lakhs paid to the government. People take risks with their hard-earned money, invest time in learning, and still a significant portion of their gains goes toward taxes.

Why Do We Have to Pay GST Even Without Real Profits?

For example, A sells goods worth ₹1 crore to B for ₹1.1 crores. Since the ₹40 lakh threshold is crossed, the business must register for GST and pay tax on the sale. But is this system fair? Even though the actual profit is only ₹10 lakhs, the GST liability may appear much higher, creating pressure on cash flow and business sustainability.

Many business owners face this issue. If they charge GST separately, customers may choose to buy from other vendors who offer lower prices. One of my clients earned only around ₹20 lakhs in profit on a turnover of ₹3 crores but paid ₹54 lakhs as GST during the process.

We criticize the British for many reasons, and one of them was heavy taxation on hardworking people. Today, people pay income tax on earnings, GST on goods and services, and taxes in many other forms. The real question is: are hardworking people being taxed too heavily?

What are your thoughts on this? Share your opinions in the comments section.