Share of personal income tax and indirect tax shows increase

Over the last week, during the election campaign, the Congress’ manifesto and the party’s emphasis on social justice and welfare were suddenly thrust into the limelight. Prime Minister Narendra Modi sought to give the Congress’ demand for a caste census and its plans to study distribution of surplus government land to the poor, among others, a communal turn. The Congress defended its manifesto saying the rising wealth inequality in the country needs to be addressed and dismissed Mr. Modi’s claims that its plans intended to favour a particular religious group. In the midst of this political controversy, the chairman of the Indian Overseas Congress, Sam Pitroda, floated the idea of an inheritance tax, which is not in place in India and is also not mentioned in the Congress’ manifesto.

Almost concurrently, as this political debate was playing out, the Finance Ministry released provisional data that showed an uptick in net tax collections. This is mostly driven by an increase in personal income tax and securities transaction tax collections. On the other hand, collections from net corporate taxes have reduced marginally. The data also show that revenues from personal income tax and securities transaction tax grew at almost double the pace compared to revenues from corporate taxes last year.

We look at some numbers to provide context to the ongoing debate and the recent release of tax data.

Chart 1 | the chart shows corporate tax and personal income tax as a share of gross tax revenue, as of February every year.

Chart appears incomplete? Click to remove AMP mode

As can be seen from the chart, the share of corporate tax has been on a decreasing trend, while that of personal income tax has been increasing. As of February 2024, the gap between the two tax shares further increased, with income tax forming 28% of the gross tax — a new peak. The sharp fall in corporate tax after FY19 can be attributed to the deep corporate tax cuts introduced by the Bharatiya Janata Party-led government in September 2019.

The data also show that the share of direct taxes has been decreasing, while that of indirect taxes has been increasing. Direct taxes, which include taxes levied directly on the incomes of corporations and individuals, are said to be “progressive” because those who earn less are taxed less and vice-versa. On the other hand, indirect taxes, which include union excise duties and the Goods and Services Tax are considered “regressive” as all consumers, regardless of their income levels, pay the same amount.

Chart 2 | The chart shows the share of direct and indirect taxes in the combined tax revenue receipts of the Centre and the States across years.

As can be seen from the chart, the share of indirect taxes, which had been falling steadily since the 1980s, has increased in the past decade. On the other hand, the share of direct taxes, which had been increasing, has consistently recorded a downturn in recent years.

Chart 3 | The chart shows the annual income bracket-wise share in total income tax returns filed (blue) and the share in total amount of income tax paid (red). Figures in %

Importantly, Chart 3 shows that a bulk of those who file personal income tax earn an annual income of ₹1 lakh-₹5 lakh. Richer individuals who earn more than ₹50 lakh are few and far between.

Moreover, a comparison with BRICS economies, for which data are available, shows that the effective personal income tax rate in India is among the highest (Chart 4).

Chart 4 | The chart compares the effective personal income tax rate in India with other BRICS countries which had data. 

Note: In case a country had two tax regimes, the highest effective tax rate was considered for comparison

Put together, the data show that poorer citizens and those in the middle-class category are increasingly shouldering a higher share of the tax burden. This is due to the combination of the rising share of personal income tax and indirect taxes in total revenue.

Rachita Rabboni is interning with The Hindu Data Team

Source: Centre for Monitoring Indian Economy, Controller General of Accounts, PricewaterhouseCoopers (PWC)

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A file photo of Shiv Sena leader Milind Deora.
| Photo Credit: EMMANUAL YOGINI

Shiv Sena’s Rajya Sabha member Milind Deora has claimed that the Congress, which once ushered in economic reforms, currently has a divisive economic agenda which seeks to derail India’s economic growth trajectory.

In an interview to PTI, Mr. Deora said the Congress was a centrist party but it “veered very, very Left” and talks about policies that have failed around the world when the party should be talking about policies which can fuel innovation and investment.

The economic reforms of 1991, the Congress’ policies of the previous 60 or 70 years, facilitated the creation of businessmen and wealth creators, he noted.

Now the Congress party is trying to “name call them, abuse them, criticise them”, the former Union Minister claimed. “It is a symptom of the fact that the Congress is moving away from its own legacy,” he said.

“The Congress had an economic agenda to take India forward. Today, I find the Congress has an economic agenda which is divisive, that seeks to derail India’s economic growth trajectory, which when India is faced with a really interesting and exciting tailwind where much of the world wants to diverse from China and invest in India,” he said.

“We should be taking advantage of that,” he said.

Mr. Deora, a Lok Sabha member from South Mumbai from 2004-2014, and served as a Union minister in the Manmohan Singh government. He quit the grand old party in January this year and joined the Shiv Sena led by Maharashtra Chief Minister Eknath Shinde.

He said many people in the Congress, including former prime minister Dr Manmohan Singh, will not subscribe to the party’s current economic view.

‘Congress implemented 1991 reforms’

It is the Congress which implemented the economic reforms in 1991 under the leadership of the then PM P.V. Narasimha Rao and Manmohan Singh, he said. “But the Congress moved away, shied away from those reforms,” the Shiv Sena MP said.

Milind Deora and his father — former Union minister late Murli Doera — share a unique distinction as both served as the Mumbai Congress president.

The Shiv Sena MP also hit out at the Congress for opposing the abrogation of Article 370 (which provided special status to Jammu and Kashmir) and said the nation’s founding fathers, who were also members of the Congress, had introduced it as a temporary provision.

Article 370 was a temporary provision in the Constitution, but the Congress “veered away” from it, he said. The Congress fought against caste politics, but today the party is advocating it, Mr. Deora said, alluding to the opposition party’s assurance of a caste census if it comes to power.

Aizawl:

The Congress on Tuesday released its manifesto for the upcoming assembly elections in Mizoram, making a slew of promises, including the reintroduction of the old pension scheme, LPG cylinders at Rs 750 for poor households and a health insurance cover of Rs 15 lakh per family for cashless treatment at hospitals.

The Congress also named Meriam L Hrangchal as its candidate in the Lunglei South seat, defying the diktat of a students’ organisation that Mizo women who marry non-Mizos should not be given tickets by any political party.

Promising to establish an efficient, transparent and corruption-free government, the Congress in its 12-page manifesto said it would strengthen grassroots democracy by giving more power, responsibilities and financial resources to the village councils and local bodies, if voted to power.

The Congress will set up better and durable public infrastructure assets such as roads, airports, power lines to promote all-round economic development of Mizoram, it said.

To enable farmers and entrepreneurs develop sustainable economic and livelihood activities, and prosper, the Congress announced the ‘Tang Puihna’ scheme, under which monetary assistance of Rs 2 lakh would be provided.

If voted to power, the Congress said that its government will provide health insurance cover of Rs 15 lakhs to each family for cashless treatment in hospitals, given that they do not have a member who is a regular government employee.

It also promised to make a budgetary provision of Rs 5 crore every year, for providing assistance to patients undergoing treatment for cancer and other serious ailments.

The party, which ruled the state from 2008 to 2018 and before that, from 1989 to 1998, said it would establish a ‘young Mizo entrepreneurs programme’ with startup funding provisions, and target creating 1 lakh jobs for the state’s youths.

Among other promises it made were an old-age pension of Rs 2,000 per month, and LPG cylinders at Rs 750 for Antyodaya Anna Yojana and Priority Household, besides those Below Poverty Line and families headed by women.

The manifesto was released by state Congress vice-president Lal Thanzara. He also announced that Hrangchal will be the party candidate in the Lunglei South seat, defying the diktat of the influential students’ organisation Mizo Zirlai Pawl (MZP).

The Congress had on Monday announced its candidates for 39 of the 40 seats, leaving the Lunglei South seat The MZP had appealed to all political parties not to nominate any Mizo woman who got married to a non-Mizo person, maintaining that it would ensure that such a candidate is not elected.

Polling for the assembly elections will be held on November 7, and the counting of votes will take place on December 3.

The ruling MNF and main opposition ZPM have already announced the names of their candidates for all 40 constituencies.

(Except for the headline, this story has not been edited by NDTV staff and is published from a syndicated feed.)

Hyderabad:

Ten grams of gold to eligible women at the time of marriage, besides Rs one lakh cash and free internet to students are some of the promises that are likely to figure in the Telangana Congress manifesto for the November 30 Assembly polls.

According to D Sridhar Babu, chairman of the TPCC manifesto committee, the gold is in addition to Rs one lakh cash, under the party’s ‘Mahalakshmi’ guarantee.

Presently, the BRS government, under Kalyana Lakshmi and Shaadi Mubarak Schemes, offer one-time financial assistance of Rs 1,00,116 at the time of marriage for brides who are residents of Telangana, who have completed 18 years of age at the time of marriage and whose parental income does not exceed Rs 2 lakh per annum.

“One tula (10 gms) of gold will be given. This (gold value) comes to about Rs 50,000 to 55, 000,” Sridhar Babu told PTI.

A member of the manifesto committee said the party is also planning to include free internet for students in the manifesto.

“After coming to power we will talk to internet service providers and work out modalities,” the member said.

When contacted Sravan Dasoju, BRS spokesperson said the Congress government in Karnataka is not able to implement their poll promises and they can promise anything under the moon.

“Telangana Chief Minister K Chandrasekhar Rao, also known as KCR, is a pioneer in bringing out and implementing innovative policies and programmes for the poor which were never imagined by any other political party in independent India,” Mr Dasoju said.

He further said BRS president Rao is known for generosity and, importantly, his compassion towards the poor and downtrodden.

KCR on Sunday announced BRS manifesto promising LPG cylinder at Rs 400 and a rise in social pensions, countering the Congress party’s “six guarantees” for the Telangana polls.

Under the ‘Mahalakshmi’ guarantee, the Congress promises to provide Rs 2,500 per month financial assistance to women, LPG cylinder at Rs 500, free travel for women in TSRTC buses across the state.

(Except for the headline, this story has not been edited by NDTV staff and is published from a syndicated feed.)