The tax officials will, of course, have a better understanding of what the revenue implications will be. But let them at least start thinking about expanding the definition.
Attempts are being made to link TCS with the tax deducted from taxpayers’ salaries. The CEA also backs the govt’s rationale for raising TCS rate to 20%
Prior to the clarification, all such non-medical, non-educational transactions would've attracted 20% TCS from 1 July. Govt imposing TCS on foreign credit card spends was widely criticised.
The total collection for 2022-23 fiscal year stands at Rs 18.10 lakh crore, 22 per cent higher than the previous year. The average gross monthly collection for the year is Rs 1.51 lakh crore.
Pakistan finance minister's support for Shehbaz Sharif govt's call to tax the rich is a relief to those who were promised it during Imran Khan's reign.
In 'Her Stories: Indian Women Down the Ages’, Deepti Priya Mehrotra recounts women from Indian history whose contributions have been all but forgotten.
The cost of childcare in China is now higher than US, France, Japan and Germany. Thanks to years of state-driven one-child policy and falling fertility rate.
India’s industrial output growth saw a 10-month low in June, with Index of Industrial Production (IIP) growing by mere 1.5% as against 1.9% in May 2025.
Standing up to America is usually not a personal risk for a leader in India. Any suggestions of foreign pressure unites India behind who they see as leading them in that fight.
I believe the figure mentioned in the article was either exaggerated to gain traction or based on a misguided understanding of reality.
The post argues that the current definition of the middle class in India is outdated and needs revision. Further, it suggests that the income tax department deems individuals earning above ₹15 lakh annually as “rich” because they fall within the 30% tax bracket. However, this conclusion is unsubstantiated. Are you implying that the threshold for the 30% tax slab is where the tax department considers individuals rich, or that only the wealthy should be paying the highest tax rate? Even then, the argument fails to account for the surcharge, which can push the effective income tax rate to over 50% for incomes exceeding ₹5 crore.
It’s important to note that the government collects direct taxes not only from the rich but also from the middle class, which serves as the backbone of direct tax collections in any economy. The 30% tax rate is far from the maximum effective tax rate and is subject to numerous deductions, particularly under the old tax regime.
The 20% Tax Rate Proposal
The proposal to cap the tax rate at 20% for incomes up to ₹1 crore is, at best, unrealistic. First, let us address the glaringly high threshold. ₹1 crore equates to roughly USD 116,412 (based on the exchange rate as of January 8, 2025). This salary is higher than the average wage in Luxembourg, Switzerland, and the United States. An income of USD 117,000 would place an individual in the top 25% of earners in the U.S. (based on 2022 data). Adjusting this figure using purchasing power parity (PPP), one could argue it would place individuals in the top 5–10% of earners in the U.S. While not an entirely apt comparison, the broader point remains: an annual income of ₹1 crore places individuals in the top income bracket, even in developed nations with significantly higher living costs.
Moving beyond the excessively high threshold, I agree that India’s tax slabs might seem steep. However, it is worth noting that less than 3% of Indians pay income tax. The income tax rate is less than most of western Europe (granted service provided there are much better). As you said you have not done any revenue implication calculation. However, as highest GST rate is 28% its extremely unlikely that consumption will increase enough that tax collection even matches the existing amount.
Lifestyle and Definitions of Wealth
What constitutes being “rich”? Does one need an S-Class Mercedes, first-class travel, and ultra-luxury housing, or is it enough to have a home worth a few crores, multiple cars, the ability to dine out freely, take international vacations, and send children to international schools (IB curriculum)? I believe the latter qualifies as being rich. An annual income of ₹50–60 lakh should comfortably support such a lifestyle. While this may not afford flats in ultra-luxury projects like Oberoi 360 West, DLF Camellias or even simply lower costing luxury projects like Lodha Trump Towers, it is sufficient to purchase a decent 3BHK apartment in the central areas of most Indian cities (excluding Mumbai and Delhi). Ultimately, the definition of wealth is subjective and varies by perspective. By understanding is that a person is rich when externalities will not impact their ability to provide basics for themselves and their family.
Rising Expenses
The post highlights how taxes leave individuals with limited disposable income after covering essential expenses. While elements like inflation and increasing education costs are valid concerns, these disproportionately affect lower-income groups compared to individuals earning ₹15–20 lakh or more. Those earning above ₹20 lakh can sustain a middle-class lifestyle comfortably, while individuals earning above ₹1 crore can maintain a wealthy lifestyle. Living beyond one’s means will always lead to financial strain, irrespective of income. Even celebrities earning millions have faced bankruptcy due to extravagant lifestyles.
Urban-Centric Focus
Yes, cities are expensive. Mumbai, in particular, is notorious for its exorbitant housing costs. However, this is not representative of the entire country. Even in Mumbai’s suburbs, property prices can rival or exceed those in the poshest areas of Bangalore. While ₹1 crore might not afford a luxurious lifestyle in Mumbai, smaller cities offer significantly better value for money. A national tax system, however, cannot have different rates for different cities.
Investments and Luxury Spending
Lastly, investments in the stock market are at an all-time high. Individuals in the 30% tax bracket are more likely to either invest their disposable income or splurge on luxury goods, often boosting foreign companies’ profit margins.
These are my personal opinions and not financial advice. You are welcome to disagree, particularly on the definitions of “rich” and “middle class.”
You have touched upon a very important and oft ignored topic. I tried to roughly calculate the taxes – direct and indirect paid by an individual with a gross annual income of 20L. Assuming he/she has a family of 4 and lives in a big city like Bangalore or Pune, the monthly expenses easily add up to 1L or more. After all the expenses, EMIs and taxes, there is hardly anything left with the person as savings for future or for discretionary expenses. Here’s the brief breakup:
Annual Income: 20Lakhs
Income tax; 2.8L
GST and other indirect taxes @12% : 1.44L
Monthly expenses: 1L
Savings after taxes and expenses: 3.76L
One is barely left with 20% savings. This is assuming a very conservative expense. Should one save for the kids future and post-retirement security or spend on discretionary items with this amount?
The “Babus” who make these policies should get out of their offices and experience the plight of the middle class.
Excellent thoughts, but whose is going to listen! The fisc deficit is the bottom line and the govt has no clue on how to flush in new reforms like Late Mr MS did
In India, a significant portion of income goes toward both direct and indirect taxes, leaving little room for personal savings or improvement in living standards. The middle class often feels burdened as they do not receive substantial government benefits, yet bear the brunt of taxation. The focus on poverty alleviation has overshadowed the middle class’s needs, which leads to frustration over the lack of equitable benefits despite their contributions to the economy.
I believe the figure mentioned in the article was either exaggerated to gain traction or based on a misguided understanding of reality.
The post argues that the current definition of the middle class in India is outdated and needs revision. Further, it suggests that the income tax department deems individuals earning above ₹15 lakh annually as “rich” because they fall within the 30% tax bracket. However, this conclusion is unsubstantiated. Are you implying that the threshold for the 30% tax slab is where the tax department considers individuals rich, or that only the wealthy should be paying the highest tax rate? Even then, the argument fails to account for the surcharge, which can push the effective income tax rate to over 50% for incomes exceeding ₹5 crore.
It’s important to note that the government collects direct taxes not only from the rich but also from the middle class, which serves as the backbone of direct tax collections in any economy. The 30% tax rate is far from the maximum effective tax rate and is subject to numerous deductions, particularly under the old tax regime.
The 20% Tax Rate Proposal
The proposal to cap the tax rate at 20% for incomes up to ₹1 crore is, at best, unrealistic. First, let us address the glaringly high threshold. ₹1 crore equates to roughly USD 116,412 (based on the exchange rate as of January 8, 2025). This salary is higher than the average wage in Luxembourg, Switzerland, and the United States. An income of USD 117,000 would place an individual in the top 25% of earners in the U.S. (based on 2022 data). Adjusting this figure using purchasing power parity (PPP), one could argue it would place individuals in the top 5–10% of earners in the U.S. While not an entirely apt comparison, the broader point remains: an annual income of ₹1 crore places individuals in the top income bracket, even in developed nations with significantly higher living costs.
Moving beyond the excessively high threshold, I agree that India’s tax slabs might seem steep. However, it is worth noting that less than 3% of Indians pay income tax. The income tax rate is less than most of western Europe (granted service provided there are much better). As you said you have not done any revenue implication calculation. However, as highest GST rate is 28% its extremely unlikely that consumption will increase enough that tax collection even matches the existing amount.
Lifestyle and Definitions of Wealth
What constitutes being “rich”? Does one need an S-Class Mercedes, first-class travel, and ultra-luxury housing, or is it enough to have a home worth a few crores, multiple cars, the ability to dine out freely, take international vacations, and send children to international schools (IB curriculum)? I believe the latter qualifies as being rich. An annual income of ₹50–60 lakh should comfortably support such a lifestyle. While this may not afford flats in ultra-luxury projects like Oberoi 360 West, DLF Camellias or even simply lower costing luxury projects like Lodha Trump Towers, it is sufficient to purchase a decent 3BHK apartment in the central areas of most Indian cities (excluding Mumbai and Delhi). Ultimately, the definition of wealth is subjective and varies by perspective. By understanding is that a person is rich when externalities will not impact their ability to provide basics for themselves and their family.
Rising Expenses
The post highlights how taxes leave individuals with limited disposable income after covering essential expenses. While elements like inflation and increasing education costs are valid concerns, these disproportionately affect lower-income groups compared to individuals earning ₹15–20 lakh or more. Those earning above ₹20 lakh can sustain a middle-class lifestyle comfortably, while individuals earning above ₹1 crore can maintain a wealthy lifestyle. Living beyond one’s means will always lead to financial strain, irrespective of income. Even celebrities earning millions have faced bankruptcy due to extravagant lifestyles.
Urban-Centric Focus
Yes, cities are expensive. Mumbai, in particular, is notorious for its exorbitant housing costs. However, this is not representative of the entire country. Even in Mumbai’s suburbs, property prices can rival or exceed those in the poshest areas of Bangalore. While ₹1 crore might not afford a luxurious lifestyle in Mumbai, smaller cities offer significantly better value for money. A national tax system, however, cannot have different rates for different cities.
Investments and Luxury Spending
Lastly, investments in the stock market are at an all-time high. Individuals in the 30% tax bracket are more likely to either invest their disposable income or splurge on luxury goods, often boosting foreign companies’ profit margins.
These are my personal opinions and not financial advice. You are welcome to disagree, particularly on the definitions of “rich” and “middle class.”
You have touched upon a very important and oft ignored topic. I tried to roughly calculate the taxes – direct and indirect paid by an individual with a gross annual income of 20L. Assuming he/she has a family of 4 and lives in a big city like Bangalore or Pune, the monthly expenses easily add up to 1L or more. After all the expenses, EMIs and taxes, there is hardly anything left with the person as savings for future or for discretionary expenses. Here’s the brief breakup:
Annual Income: 20Lakhs
Income tax; 2.8L
GST and other indirect taxes @12% : 1.44L
Monthly expenses: 1L
Savings after taxes and expenses: 3.76L
One is barely left with 20% savings. This is assuming a very conservative expense. Should one save for the kids future and post-retirement security or spend on discretionary items with this amount?
The “Babus” who make these policies should get out of their offices and experience the plight of the middle class.
Excellent thoughts, but whose is going to listen! The fisc deficit is the bottom line and the govt has no clue on how to flush in new reforms like Late Mr MS did
Nothing is going to change. This government only knows how to milk the salaried class to the maximum possible extent and give nothing in return.
In India, a significant portion of income goes toward both direct and indirect taxes, leaving little room for personal savings or improvement in living standards. The middle class often feels burdened as they do not receive substantial government benefits, yet bear the brunt of taxation. The focus on poverty alleviation has overshadowed the middle class’s needs, which leads to frustration over the lack of equitable benefits despite their contributions to the economy.