India’s tax system has long been under scrutiny for favoring the wealthy over the salaried middle class. The irony? A salaried person earning ₹20 lakh a year may end up paying more tax than a business tycoon who earns ₹5 crore through capital gains. Here’s how and why.
Key Highlights of the Report
- Salaried individuals are taxed more than wealthy business owners.
- Only 1% of Indians are ultra-wealthy, but they contribute less in taxes than the salaried middle class.
- Asset-based income is favored by the Indian tax structure.
- Wealthy individuals use legal methods to avoid taxes.
- It’s time to rethink what real wealth truly is.
Understanding the Disparity
The Indian tax code heavily favors capital income over earned income. Capital gains, investments, and dividends often enjoy reduced tax rates, whereas every rupee earned by a salaried employee is tracked and taxed.
Also Read: 55th GST Council Meeting: A Game-Changer in India’s Tax Landscape
According to RBI MPC member Ram Singh, many affluent groups underreport their income, and a huge chunk of capital income doesn’t even make it to tax records.
How the Rich Save on Taxes?
Here’s how the wealthy manage to pay less tax:
Offshore Accounts:
Money is transferred to tax-haven countries to avoid Indian tax scrutiny.
Loans Instead of Liquidating Assets:
Loans aren’t considered income. Wealthy individuals borrow against their assets instead of selling them, legally bypassing taxes.
Investments:
Long-term capital gains from assets like stocks or real estate are taxed much lower than salaries.
What the Government Can Do?
- Introduce a wealth tax or inheritance tax.
- Increase transparency and auditing of capital income.
- Rationalize tax slabs to balance salaried and non-salaried taxation.
- Cap or limit exemptions and deductions for high-net-worth individuals.
What Is Real Wealth?
Material wealth fades, but spiritual wealth is eternal. According to Kabir Sahib Ji, real wealth lies in:
Naam (True Mantra) – The priceless treasure of salvation.
Bhakti (True Devotion) – Worshiping the Supreme God, Kabir Sahib Ji.
Gyan (Spiritual Knowledge) – The truth that liberates.
Detachment from Maya – Freedom from illusion, greed, and ego.
Kabir Sahib Ji says:
“Maya mari na man mara, mar mar gaya sharir |
Asha trishna na mari, kahe gaye Saheb Kabir.”
(Even when the body perishes, desires remain – true liberation is killing desires, not the body.)
FAQs: Why Salaried Indians Pay More Tax Than the Rich
Q1. What is Capital Gains Tax, and why is it lower than income tax?
A1. Capital Gains Tax is applied to profits earned from the sale of assets like stocks or property. It’s often taxed at 10–15% to encourage long-term investment, whereas salaried income can be taxed up to 30%.
Q2. Why do salaried individuals end up paying more taxes?
A2. Salaried income is fully tracked and taxed at source (TDS), with limited deductions. In contrast, business owners and investors often use exemptions, loopholes, and tax planning to reduce liability.
Q3. How do rich people legally avoid taxes in India?
A3. They use strategies like investing in tax-friendly assets, taking loans against their wealth, underreporting income, or shifting funds to offshore accounts.
Q4. Is this tax disparity unique to India?
A4. No, but it’s more visible in India due to fewer enforcement mechanisms and more lenient capital income tax policies.
Q5. What can the government do to fix this imbalance?
A5. The government can introduce wealth taxes, audit high-net-worth individuals more strictly, close tax loopholes, and create a fairer tax structure that balances salaried and capital-based income.
