Leveraging Census 2025 Data for Shaping India’s Inclusive and Resilient Tax and Policy Framework
India is a land of diversity, with languages, dietary habits, and cultures of people changing after every few hundred kilometers. For a subcontinent sized country like India, the knowledge about its demography becomes crucial for the legislative and executive functions which include policy making, law enforcement, infrastructure development etc. It is vital to mention that on the shoulders of these assignments only, the smooth functioning of the affairs of the nation rests.
The recent announcement of Government of India to conduct the decennial census exercise is a welcome step as this exercise not just holds importance for the socio-political policy-making, but also for economic planning, at large. Worthwhile to mention here is that a sound and dynamic taxation policy is the barometer of a nation’s economic policy-making.
With India’s aspirations for greater tax compliance, inclusion of the informal economy in the mainstream, and targeted tax relief measures for the vulnerable and marginalized populations, the insights gained from Census 2025 shall be the guiding force to drive tax reforms that reflect the country’s current socio-economic realities. By leveraging this data, India’s taxation policy can move toward greater efficiency and equity, ensuring that tax revenues are collected in a way that supports sustainable growth while simultaneously addressing regional and social inequalities. Therefore, it can be stated beyond reasonable doubt, that Census 2025 shall play an indispensable role in shaping a modernized, responsive and resilient tax framework for India.
It is an established fact that agriculture, the primary sector of our economy employs the greatest number of people in the country and on the flip side of the coin, has a disproportionate contribution in the GDP which indicates presence of Disguised Unemployment, low productivity in agriculture and low mechanization of the agricultural sector in the country. The Census of 2025 will show the real, present-day picture of India’s agriculture sector and the workforce involved in it. It will also unfold certain underpinnings like the rising role and contribution of females in agriculture which will aid further in comprehensive and detailed policy making, providing comprehensive benefits to the females.
Currently the income from agriculture and other related agricultural activities is exempt from taxation, but one school of thought argues that this type of exemption breeds horizontal inequality, where individuals with comparable earnings find themselves taxed differently based on the origin of their income. The large landholders (0.4 % of landholders hold land in excess of 10 ha) are also exempt from paying taxes even though they may be earning significant amount of agricultural income. Review of Literature in this regard further indicates that the current exemption on agricultural income has increasingly become a vehicle for sophisticated tax avoidance strategies. High-net-worth individuals, large landholders, and corporates frequently exploit the respective provisions to shield substantial non-agricultural earnings from taxation, undermining the integrity of the tax system. The Census Data driving on modern vehicles of Artificial Intelligence and Big-data analytics will uncover various sub surface facts and figures which will help the policy makers to appreciate a broader and larger picture pertaining to income and demographics and will support in devising strategies for deepening and widening of the tax base.
Various researchers and scholars have time and again proposed Introduction of taxes on agricultural income on certain individuals holding larger land base, with certain ceiling and floor limits. The data obtained through Census would broadly help in serving as a robust measure to devise policies in promoting a more equitable tax structure and ensuring that all citizens contribute their rightful share to national revenue.
Furthermore, the Census data shall also provide extremely crucial information regarding the demographic-pyramid of the country depicting the age structure and picture of the gender dynamics of the country in great detail. As per the Census 2011, the population aged 60+ in India stood at 104 million i.e. 8.6% of the population. This population is vulnerable and dependent on the government or their children due to advancing age ailments.
Current updated data on the geriatric population extracted from the Census 2025 shall help in framing our tax policies in a more robust manner. Some steps include, reducing GST on main and ancillary services being provided to elderly population like the doorstep geriatric care services which are taxed at 18% under GST, as has been held by The West Bengal Authority for Advance Ruling (AAR) in the case of Snehador Social & Health Care Support. With elderly population prone on presbycusis, GST at the rate of 18% on accessories of hearing aids should witness reduction. Having said that, it is evident that this high tax liability hurts the ailing elderly population with excess financial burden of the taxes on the essential services and the census data can be a gamechanger by marshalling data for policy makers to bring respective changes in the policy.
By correct interpretation of the census data, various problems of the elderly population shall be alleviated. Policies like providing tax incentives, tax breaks or EPFO contributions benefits to corporates on hiring senior citizens in their establishments, will provide the elderly a source of income, increase productivity and at the same time the corporates will play their part to contribute to the ‘Grey Economy’ of the country.
Moving ahead, the Census data will also uncover the true demographics of the persons with disability and will provide sufficient data for Department of Empowerment of Persons with Disabilities, Ministry of Social Justice and Empowerment to bring ray of hope for the different abled. The humongous success of Indian athletes in the Paris Paralympics 2024 speaks volumes about the huge unexplored potential in the persons with different abilities and also warrants a need for providing best of the policy support to them.
It is very disappointing that electrolarynx, cochlear implants etc are still being taxed at 5% GST. The issue which needs attention of the policy makers is that all medical devices except Hearing Aids are subject to GST and this has undoubtedly, caused sufficient miscarriage of justice for the said section of the society.
Apropos the same, With the data from “Incidence of Cardiovascular Risk Factors in an Indian Urban Cohort” report showing the rise in lifestyle diseases like kidney disorders, diabetes, heart diseases etc. in India leading to growth of cardiovascular disorders (CVD) from 2.26 million in 1990 to 4.77 million in 2020. It is very dismaying that still Life-saving devices like Artificial pacemaker, dialysis units are taxed at the rate of 5.5% – 18% GST rate.
Thus, the taxation policy needs to be revisited to ensure the Right to Health under Article 21 of the sacrosanct Constitution is not sacrificed at the altar of rising tax rates and Census data can surely be an eye opener in this regard.
Considering other dimensions, Census data will also provide the details of the workforce available in the county which will further help to devise policies for the best use of this demographic dividend. Policies augmenting skill impartment to the workforce and providing employment can only be formulated when we have accurate census data in hand.
As per the Budget 2024 the current unemployment rate is 3.2% but as per Directorate General of Employment Data the youth unemployment stands at 10% for 2022-23. Thus, the Census data could help the policy makers to frame better and comprehensive policies to reduce this unemployment and increase the entrepreneurial spirit in the Country. The recently launched ‘Employment Linked Incentive Scheme’ is intended to address the above-mentioned problem. It provides one-month wage to all persons newly entering the workforce in all formal sectors as registered in the EPFO, upto the maximum limit of Rs. 15,000/-. The proposed 2025 Census data will help to fine tune the above-mentioned scheme with sectoral and regional incentives to ensure holistic development of the workforce is achieved.
This decennial census data has further implications on the domain of taxes on life-saving aspects like health insurance and life insurance. Currently, the GST on Health and life insurance stands at 18%, which makes opting for health insurance extremely expensive for the poor and middle-class population of the country and has largely resulted in failure of deep penetration of the insurance sector. The Census data will provide the updated data of the population with forward and backward linkages and in turn will help in apprising the policy makers about the need to reduce the GST taxation rates in the insurance sector. An increase in ageing population when compared with the statistics of the Census data shall clear the paths for policy makers to drop the myopic view and appreciate the need for lower GST rates on insurance premium.
The Data from Census will not only aid in creating jobs but also has the potential to prevent emigration of High Net-worth Individuals (HNI) and youths from leaving the country, subject to framing of the appropriate policies attracting talent. Therefore, the census data could help decipher the extent of HNI and youth emigration and frame policies to arrest this departure. This data analytics on the emigration of HNI from India could be expanded, by providing incentives in form of tax breaks and tax cuts as previously done in 2019 for new companies to attract new FDI, motivate Foreign-educated Indians to partake in ‘Make in India and Make for the World’ to build new startups in fields like space, defence and agriculture among others, as is being done in Singapore and Dubai through schemes like Golden Visa. This could help us to increase the number of our Unicorns from 111 to over 300 as is the case in China.
Furthermore, Census data has close correlation with data pertaining to direct taxes as well and can provide detailed inputs in devising strategies for improvising the tax structure of the country. A lucid tax structure with minimum uncertainties will serve as green shoot for the economy and will help in attracting FDI as well.
As already cited supra, the Census data could be used to increase the tax base of the country. Recent data shows that 7.4 crore people filed income tax returns in 2022-23, of which 5.16 crore people, or 70 per cent, had zero tax liability. This means that just 2.24 crore people paid income tax in 2022-23, which works out to just about 1.6 per cent of the total population in India compared to 18 crore in China. But a more worrying trend is the fall in the contribution towards tax by the 1% of population and increase in the same by the bottom 25%, this showcases the widening wealth gap between the ultra-rich and the middle class. The census data could help identify such ultra wealthy individuals and ensuring they are taxed appropriately. Additionally, the steps like GST rate reduction could be undertaken to alleviate the burden from the shoulders of the burgeoning middle class of the country.
It is a well-accepted fact that good and comprehensive data is the currency of a well-formulated government policy. And the Census provides this data for the policy-making in a country like India where the informal sector accounting for Rs. 15.4 lakh crore Gross Value Addition to the Economy is still majorly outside the tax bracket. But the lack of availability of substantial data like, the number of people employed in informal sector, their incomes, high amount of cash transactions, etc. all lead to loss of potential tax sources towards the public purse. The data from the census could be compiled and tallied with EPFO data, Periodic Labour Force Survey (PLFS) data and by using Big-data analytics, AI models, the exact extent of Informal sector shall be gauged. This will potentially help us in the process of formalisation of the economy and help to tax the presently cash-dominated sector, resulting in increase in tax revenues, and providing social security cover to millions of informal workers through their addition in the EPFO scheme.
In conclusion, it is pertinent to understand the importance of accurate, timely data collection as it has been rightly said that “Without big data analytics, policy formulators are blind and deaf, wandering on the highway like a deer.”
Similarly, continuous data collection and data-based policy formulation is necessary as India aspires to not just ‘grow’ but ‘develop’. This entails not just focussing on the growth rate but the overall Human Development of the country which includes following the footprints of a country like Bhutan in ascertaining Gross National Happiness as well. Data has the inherent potential to ascertain the country’s progress by assessing the happiness and well-being of its citizens and not just economic parameters.
Having said that, it is axiomatic that there is not only a strong need to strengthen social fabric of the country but also strengthen the economic pillars of the country and this can be achieved only by optimal use of the data so collected by the proposed Census 2025. Therefore, it can be deciphered that the policy based on the data of the proposed Census 2025 has the inherent potential to guide us on this path of Amrit Kaal towards the goal of Viksit and Saksham Bharat by 2047.
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