India's Taxpayer Myth: Busting the 3-Man Myth

It's a common misconception that the total number of tax-payers in India is merely 3. This is highly misleading and shows a lack of understanding about the tax system in the country. While it is true that some individuals pay taxes, the reality is far more complex and encompassing a much larger population.

Overview of Tax Payers in India

I am not a software engineer and have been paying income tax (IT) for the past six years. The same goes for most of my colleagues. Despite some individuals not paying taxes, it is important to understand that the tax system in India covers a wide range of professionals and salaried individuals.

Different Tax Slabs and Tax Mitigation Options

For instance, there are various tax slabs, and people who earn above a certain threshold are required to pay taxes. However, there are also provisions for tax mitigation. For instance, investments in government-based options like infrastructure bonds are not taxable. Similarly, the construction or purchase of a house provides certain deductions, and paying for your children's education up to a certain amount is also non-taxable.

Moreover, it's not just the salaried class that bears the brunt of taxation. Everyone in the country contributes through indirect taxes which include Value Added Tax (VAT), excise duties, and customs duties, among others.

Professionals Beyond Software Engineers

While it is true that a high percentage of software engineers are eligible for tax, it does not mean they are the only tax payers in the country. There are numerous other professionals such as engineers, chartered accountants, architects, doctors, and professional management consultants. All salaried people who receive their salaries in their bank accounts are covered under tax deduction concepts.

Corporates are also included in the tax deduction provisions, which means the entire business class, along with professionals and salaried individuals, is covered. However, this still accounts for only about 3% of the country's total population.

Raise in Tax Base and Global Trends

The reality is that many people are not compliant with these provisions. There are many who are liable to pay tax but are evading it until someone notices. This is why the issue of black money was a major agenda for all the major political parties in the 2014 general elections.

Increased tax evasion poses a significant challenge for widening the tax base in India. It is essential to incentivize more individuals to pay their taxes. As more people start adhering to tax laws, tax rates are likely to come down for all. This way, the tax burden will be more evenly distributed and also alleviate the disproportionate burden on the middle and salaried class.

Indirect Taxes and Corporate Credit

It is important to note that corporations tend to benefit more from indirect taxes. They use various deductions and incentives to plan their taxes effectively, which in turn can lead to a perception that they are the primary bearers of tax-related loads.

In conclusion, the idea that there are only three tax payers in India is a gross oversimplification. The tax system is diverse and complex, impacting a much larger segment of the population. Encouraging more compliance and awareness around tax laws is essential for a sustainable and equitable tax system.

Keywords: taxpayers, software engineers, indirect taxes