2.8 crore payers taxed to death; one-third of salary eaten up by taxes
Mumbai: The proposed tax on withdrawal from new EPF accounts, whose modalities are still to be made clear, is just the latest blow on the small minority that pays Rs 3,53,174 crore to the nation.
According to Economic Survey data, 79 lakh people report an income of Rs 5 lakh and above, while those who report a less than Rs 5 lakh income are 2.07 crore.
The vast majority — 94.2 per cent — of Indian population, either have an income below tax limit or do not pay taxes. This minority of 2.86 crore especially the salaried class is subject to a host of other taxes such as VAT, service tax, surcharges, cesses.
All these taxes are paid from income already taxed. And yet, the Centre proposes to take away every subsidised product or service that this taxpayer can access, like LPG for example. The Economic Survey has suggested that this tax-payer’s small savings be taxed as well.
The highest tax slab of 30 per cent equally to the one who gets Rs 10,00,001 or Rs 99 lakh. A person in the top income-tax slab pays 33 per cent income tax. The remaining 67 per cent is available for spending and savings. This tax-payer shells out 15 per cent service tax or 12.5 per cent VAT on almost everything he or she purchases.
One-third of salary eaten up by taxes
This indirect taxes eat away 13.75 per cent on the already-taxed income. The I-T and consumption taxes together add up to to 46.5 per cent. A person in the 20 per cent slab pays 33.75 per cent of earnings as I-T and consumption taxes. In the 10 per cent bracket, they add to 23.75 per cent of total income.
The salary earner can save on tax, but there is a limit for that too. At the top end, one can save only Rs 4.5 lakh. The EPF tax comes in this backdrop. Mr Suresh Sadgopan, financial planner and co-founder of Ladder7, called the proposal a retrograde step. “Since people largely don’t have any other instruments for retirement planning, the government’s move is a “retrograde step,” he said.
