Highlights
India’s Taxation System Reform: A Call for Change
Calls to reform India’s taxation system are on the rise, with a number of financial influencers advocating for a reduction in taxes. One influencer noted that making India the “taxation capital” of the world is not a viable solution, while another observed that the salary group pays more in taxes than they manage to save. Additionally, a different influencer highlighted that the high tax burden is a significant factor prompting many high earners to leave the country.
Wisdom Hatch founder and well-known finfluencer Akshat Shrivastava emphasised that the economy is struggling, stating that simply discussing the country’s GDP is insufficient. He proposed three immediate measures to enhance the economic situation: lowering taxes, expanding the tax base, and offering job-related incentives to businesses.
Shrivastava advocated for a reduction in GST, suggesting that a 15 per cent maximum slab should be established. He recommended broadening the tax base to include organisations like the BCCI and IPL, which he estimated could generate an additional Rs 6,000 crore in tax revenue. Furthermore, he proposed that startups be granted 0 per cent tax benefits contingent upon employing a specified number of individuals.
Taxing citizens excessively while aiming to establish India as the taxation capital globally is not the solution, he argued.
Current Economic Concerns
Our economy is indeed facing critical challenges. While discussing a projected GDP of 10 trillion or 40 trillion, the observable reality depicts a broken system. If immediate action is not taken on his three proposals, the economic situation may worsen:
- Reduce taxes: Implement an immediate cut on GST with a maximum slab of 15%.
- Broaden the tax base.
Taxpayer Burden
Another influencer spoke out against India’s heavy taxation, revealing that individuals pay over Rs 2.5 crore in direct and indirect taxes throughout their careers, yet their total assets and savings often do not even reach Rs 1 crore. This stark reality illustrates the plight of taxpayers who feel drained yet receive very little in return. It appears that the government perceives citizens as existing solely to contribute to taxes and endure hardship.
Disparities in Taxation
Investor and trader Jose Paul Martin discussed the disparities between individual and business taxation. He highlighted that individuals often feel exploited, bearing a substantial tax load.
He mentioned that individuals typically pay around 25 per cent of their income to the government, excluding GST. For example, if a person earns Rs 5 lakh and their expenses amount to Rs 1 lakh, they would actually end up contributing Rs 1.3 lakh to taxes. He further noted that the impact of GST on their remaining earnings is yet to be factored in, suggesting that starting a business might be a more financially viable option.
Recent Budget Announcements
In the 2025 Union Budget, Finance Minister Nirmala Sitharaman declared that no income tax would be imposed on incomes up to Rs 12 lakh under the new system. She mentioned that the threshold for salaried taxpayers would be Rs 12.75 lakh, incorporating a standard deduction of Rs 75,000. This new tax structure aims to ease the tax burden on the middle class, allowing them to retain more of their earnings.
The revised tax rate structure is as follows:
- Rs 0-4 lakh – NIL
- Rs 4-8 lakh – 5%
- Rs 8-12 lakh – 10%
- Rs 12-16 lakh – 15%
- Rs 16-20 lakh – 20%
- Rs 20-24 lakh – 25%
- Above Rs 24 lakh – 30%
