Navigating India's Tax Landscape: A Reality Check

In this post, your attention is drawn to a pressing concern that stems from a worrisome message, stating that school fees have risen to a staggering 3.8 lakhs and the only way to manage such an amount is by taking out a loan. Despite raising eyebrows and possibly causing a few gasps, this scenario is indeed a reality for many Indians. This situation is starkly contrasted with a few decades ago when the average school fee in local schools was much more affordable.

Key Takeaways

• Understanding and recognizing the discrepancies and complexities in India's taxation system.
• The austerity felt by the middle class who bear the brunt of India's taxation.
• The need for collective unity among the middle-class taxpayers.

Rising School Fees Against Stagnant Salaries

While it's clear that private school fees are surging in India, it's equally significant to note that salary increments aren't keeping pace, particularly in the IT sector. The median salary of an IT worker in India who is fresh in the professional landscape is around 3.55 lakhs.

Government Services: Use vs Non-Use Debates

Questions about the viability of government-run schools in comparison to private ones often arise in this discussion. Similarly, comparisons extend to health services provided by the government and other public amenities which, despite taxpayer contributions, see limited use by the middle-class community.

Taxation in India vs Other Countries

Looking abroad, particularly to Nordic countries, you'll find that their higher taxation structure is often justified with far-reaching benefits channeled back to the people.

In Sweden, for instance:

• Healthcare is free and widely utilized by the public.
• School and college education are free. Students pursuing higher degrees are even given stipends.
• Social security for those in need includes assistance covering food, clothes, hobbies, hygiene, and more.

In India, however, despite a population paying taxes around the 15-25% bracket, similar benefits like free health care, free education, or extensive social security are far from widespread. This reality has led some to label the Indian tax structure as punitive.

Thinning Tax Base

Compared to Sweden, where almost 75% of the target group pay taxes, India's taxation base is quite slim. The Income Tax Department reports that out of a plausible tax base of around 70 crores, only eight crore individuals actually pay tax. This reality pushes the brunt of tax collection onto the middle class.

Punitive Tax Structure

A punitive tax structure is characterized by its harshness on the taxpayers that it targets. India's indirect tax structure through the Goods and Services Tax (GST) is an example of this. With numerous tax rates depending on the type of goods or services, the system becomes dauntingly complex for the average citizen.

Government Expenditure: Legitimate Vs Unproductive

The discussion around government expenditure and its prioritization becomes critical at this point, particularly when considering aspects of unproductive expenses. Example is cited of monument building such as the 'Statue of Unity' costing approximately 3000 crores, while its revenue is significantly lower.

Way forward and Conclusion

The call to action for the middle class remains clear: Become informed citizens, unite, and understand the purpose and impact of where taxpayers' money is being invested. Additionally, upskilling and understanding the complex world of investment is critical for wealth preservation in the face of high costs and inflation.