In India, just 3.5 crore people, or 2.89 percent of the over 121 crore people living there, file income tax returns.
Among the 121 crore people, there may be your 95-year-old grandmother and your 1-year-old son who are unemployed. Neither must submit tax returns. Actually, there are only 47 crore persons in the workforce. India employs 47.41 crore people: Government
Almost half of them work in agriculture. It is essentially free from income tax. Like many other countries, ours has an idealistic view of agriculture as a holdover from its agricultural past. In some way, we believe that farmers are more important than the rest of us.
That leaves, in any case, only roughly 23 crore individuals who are employed by manufacturers and service industries.
You must make at least Rs. 2.5 lakhs a year in order to be required to pay income tax. Since we’d prefer not to tax the impoverished.
Although the data is a little outdated, it still demonstrates that the top 20% of earners earns significantly less than Rs. 2.5 lakhs annually. Less than 20% of the 24 crore workers in the manufacturing and service sectors may truly earn Rs. 2.5 lakhs or more annually.
Look past the yelling TV reporter, please. See how many people make at least Rs. 25k a month in salary by visiting places outside of big cities. That is not a particularly large portion of the overall population, which also includes homemakers, children, students, the unemployed, and the elderly. It is improbable that the proportion will surpass 4%.
All things considered, though, this is not a small number. Compared to the UK or Germany, we have a higher income tax payer base. Additionally, they collectively bring in Rs. 3.5 lakh crores for the government.
Let’s use some fundamental mathematics to analyze the data .
In India, the population under 21 makes up about 48% of the total. Leave them out, as the majority of them—aside from a few uncommon exceptions—would not be required to pay income taxes because they are not employed. In truth, even if someone under the age of 21 were to be employed, it would usually be due to financial difficulties and they would be working in low-paying employment, therefore their income would almost certainly not be taxable because they would be performing some low-paying work.
That leaves us with 52% of the total population.
Currently, agriculture is the primary source of income for 70% of Indians. This also roughly translates to roughly 66% of the population receiving food subsidies, given that they are considered to be impoverished. Only one of these two figures will be used. In light of this, deduct 70% of 52% fairly. That leaves us with 15.6% of the population.
About half of the 15.6% population would be women, the majority of whom would not typically be employed in a profession. Assume for the moment that 90% of women do not work for pay. This implies that of the remaining 15.6%, 45% (i.e., 90% of 50%, the women component) will need to be eliminated once more.
That leaves us with 8.58% of the total population. There might be some elderly individuals among them as well, perhaps above the age of 75, many of whom might not be employed. Nevertheless, let’s set aside all further exclusions of this kind for the time being.
Hence, we see that only roughly 8.58% of the population in India would be considered working adults who may be subject to income tax (keep in mind that this does not include individuals who are employed in agriculture and are not subject to income tax).
But you may just take a glance around you. It’s possible that the majority of those employed are laborers, rickshaw pullers, clerks, drivers and conductors, small-time vendors selling goods on sidewalks, hawkers, etc.
The majority of these individuals would not make more than ₹ 2,50,000 annually, which is not subject to income tax.
Estimation is that between 50% and 60% (8.58%) of these individuals would make less than ₹ 2,50,000 annually and not be required to pay income tax. Let’s choose 50% as a conservative estimate. Thus, take out 50% of the 8.58% once more.
Consequently, the remaining population in India who is required to pay income tax is just approximately 4.29%, or roughly 4% of the total population.
These numbers don’t really differ from one another. If there is a difference at all, it is negligible and readily explained by individuals dodging taxes, failing to disclose their entire income, etc. Alternatively, this tiny discrepancy could potentially be the result of different estimations that we took into account when calculating the approximate 4% of Indian citizens that are required to pay income tax.
Therefore, with the exception of a small number of dishonest persons, we may fairly assume that the majority of Indians who are required to pay income tax are actually doing so.
As a result, neither the percentage of Indians paying income tax nor its extreme abnormality should come as a huge surprise.
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Yes they may be paying the tax but certainely not the full amount which they are supposed to pay. There are still people from many profession who receive fee in cash and do not disclose all. So are many business such as real estate and jwellery who are still playing in cash