Poor middle class is getting taxed more: The gold standard demands 10% tax slab to start from Rs 10 lakh today
income tax on the middle class — the most honest taxpaying group?
The intention behind collecting income tax is noble as it helps in wealth redistribution and contributes to the growth of the economy. And, the Indian middle class is one of the most prominent groups that contribute to the nation's revenue through income tax. However, the process fails to live up to its intended goal when it starts taxing people with relatively lower income.
Money loses its value with time due to inflation. So if tax slabs are not increased with time, it would mean people are paying income tax on lower real income. This has become an issue worth serious consideration today.
According to budget 2014, an income tax rate of 20% became applicable on income above Rs 5 lakh and 30% on income above Rs 10 lakh. This has not changed in the last 10 years. If we take average inflation to be 6%, the real value of Rs 5 lakh and Rs 10 lakh of 2014 would now be Rs 2.8 lakh and Rs 5.6 lakh, respectively.
What it means is that while people were paying 30% income tax on income above Rs 10 lakh in 2014, they are now paying 30% income tax on a real income of Rs 5.6 lakh, when compared with 2014. This clearly shows that relatively poorer people with lower real income are now paying a higher income tax.
The current taxation system appears to be very tough on the Indian middle class, especially the lower middle class. The budget of 2005-06, presented by P Chidambaram, is famous for being middle-class friendly and is still touted as «a dream budget». In
