“Solely 2% of Indians pay revenue tax” : Cease Referring To Us As Tax Avoiders

Introduction

At the moment I’ll speak about one thing that’s been bothering me for some time. You’ve in all probability heard this line thrown round lots: “Solely 2% of Indians pay revenue tax.” Sounds dangerous, proper? To me it does, as a result of it’s type of humiliating once we are being brazenly referred as thieves, like 98% of us are avoiders who don’t care about contributing to the nation. This narrative is unfair, incomplete, and actually, a bit demeaning.

So, enable me to declutter some info and figures for you which can show that this narrative of “solely 2% Indians pay revenue tax” paints us in a incorrect mild.

The “Solely 2% Pay Earnings Tax” Declare: What’s the Reality?

I got here throughout a information article which mentioned that out of India’s complete inhabitants of round 143.81 crore in 2025, solely 2% pay revenue tax. That’s about 2.81 crore folks in FY 2023-24.

At first, I assumed, “The quantity 2% is so tiny! Are we actually not paying our taxes?”

However then I began pondering, does this quantity inform the entire story? So I made a decision to dig deeper.

Everybody can’t pay revenue tax

India’s inhabitants is big, however not everybody pays revenue tax, proper?

We’ve acquired children, aged people, housewives, and people who find themselves unemployed. So, I did some math to determine who’s really ready to earn and pay taxes.

Right here’s what I discovered:

• 0-21 years previous: About 37.5% of our inhabitants is underneath 21, children and younger adults who’re nonetheless learning or simply beginning out. That’s round 53.93 crore folks.
• 65 years and above: Round 7% are senior residents, principally retired. That’s 10.07 crore folks. I’ve assumed {that a} large majority of this class are falling underneath the tax exemption part. Most of them are additionally not ready to file their ITR repeatedly.
• Housewives/non-working spouses: Roughly 27.5%, principally ladies who handle households and don’t work exterior. That’s 39.55 crore folks.
• Unemployed (aged 21-60): About 2.5% of the inhabitants within the working age group (21-60) who don’t have jobs. That’s 3.60 crore folks.

Add all these up: 37.5% + 7% + 27.5% + 2.5% = 74.5%. So, 74.5% of India’s inhabitants, round 107.14 crore folks, aren’t even ready to earn taxable revenue.

That leaves us with 25.5%, or 36.67 crore folks, who’re “working and incomes.”

Out of those, 2.81 crore paid revenue tax in FY 2023-24. That’s not 2% of the entire inhabitants, it’s 7.67% of the working and incomes inhabitants (= 2.81 ÷ 36.67 × 100).

See the distinction? While you say “solely 2% pay revenue tax,” it seems like virtually nobody is paying (98% will not be paying).

However if you have a look at the individuals who pays, it’s 7.67%. That’s a significantly better quantity, don’t you suppose? I do know, it’s nonetheless not an awesome quantity, however we should not neglect that we’re speaking about India.

In our nation, annual revenue of majority folks is inside Rs.2.0 Lakhs.

What’s the revenue tax exemption restrict? Until FY 2023-24, revenue upto Rs.7 Lakhs was tax exempted. As per the newest funds (Feb-2025), folks incomes upto Rs.12 Lakhs will probably be tax exempted. So, if these individuals are not paying tax, it signifies that their annual revenue is inside the tax exemption limits. How can they be blamed for that?

We’ve Been Rising Our Tax Contributions at 15% each year

Now, let’s speak about one thing much more fascinating.

I’ve collected some historic knowledge from the division of income.

In FY 1995-96, private revenue tax (PIT) assortment was Rs.15,592 crore. By FY 2023-24, it had jumped to Rs.10,45,139 crore. That’s an honest improve over 29 years, rising at price of 15.6% per 12 months. To place that in perspective, the Sensex, our inventory market index, grew at simply 11.58% per 12 months over the identical time.

So, our tax funds have been rising quicker than the inventory market.

Take into consideration that for a second.

Whereas the federal government may say, “Oh, we’ve elevated tax assortment by 15.6% per 12 months,” we are able to flip it round and say, “We taxpayers have been rising our contributions by 15.6% yearly for 29 years.”

That’s an enormous effort, particularly when you think about that inflation (round 5-6% per 12 months) and nominal GDP development (round 10-11%) have been a lot decrease. We’re not simply paying taxes, we’re rising our contributions quicker than the financial system or the markets.

So why are we nonetheless referred to as tax avoiders?

Everybody Pays Taxes – Even If It’s Not Earnings Tax

Right here’s one other level that helps my case that Indian residents shouldn’t be referred as revenue tax avoiders.

The “2% pay revenue tax” narrative solely talks about direct taxes, the private revenue tax. However what about oblique taxes, like GST, Customs, and Excise Obligation? These are taxes all of us pay once we purchase issues, whether or not it’s a packet of biscuits, a brand new cellphone, or petrol for our bikes.

You’ll be able to’t escape them, even if you happen to don’t file an revenue tax return.

I seemed on the tax assortment knowledge for FY 2023-24. The federal government collected a complete of Rs.34,56,019 crore in taxes. Right here’s the break-up:

• Complete Direct Taxes: 56.72% (Rs.19,59,956 crore)
  • Private Earnings Tax: 30.24% (Rs.10,45,139 crore)
  • Company Tax: 26.36% (Rs.9,11,015 crore)
  • Different Direct Taxes: 0.11% (Rs.3,802 crore)
• Complete Oblique Taxes: 43.28% (Rs.14,95,911 crore)
  • GST: 27.69% (Rs.9,57,608 crore)
  • Customs: 6.74% (Rs.2,32,936 crore)
  • Union Excise Obligation: 8.83% (Rs.3,05,169 crore)
  • Service Tax: 0.01% (Rs.346 crore)

Have a look at that, 43.28% of the federal government’s tax income comes from oblique taxes. That’s Rs.14,95,911 crore paid by all of us, whether or not we’re a every day wage employee shopping for cleaning soap or a businessman shopping for a automobile.

GST alone is 27.69%, virtually as a lot as private revenue tax (30.24%).

So, when somebody says, “Indians don’t pay taxes,” I need to ask, actually? What in regards to the GST I paid on my morning chai, or the Customs responsibility on my new earphones?

Everyone seems to be contributing, even when it’s not by revenue tax.

The Burden on a Few – However We’re Nonetheless Contributing

An NDTV article additionally identified one thing that exhibits how unequal the tax system might be.

Out of the two.81 crore individuals who paid revenue tax in FY 2023-24:

• The highest 1% (2.81 lakh folks) paid 50% of the entire private revenue tax.
• The highest 9% (25.3 lakh folks) paid 87% of it.

Which means the highest 10% (28.1 lakh folks) are carrying an enormous burden, whereas 90% of taxpayers (25.29 crore) paid between Rs.0 and Rs.1.5 lakh.

This exhibits two issues.

• First, a small group of excessive earners is paying the majority of the revenue tax. A half of it comes from simply 2.81 lakh folks.
• Second, most taxpayers are paying little or no as a result of their incomes are low or they declare exemptions.

However does that imply the remainder of us aren’t contributing? In no way. We’re paying by oblique taxes, and those that do pay revenue tax are rising their contributions at 15.6% per 12 months, as we noticed earlier.

Why the “Tax Avoider” Label Hurts

I discover it actually unfair when folks say, “Solely 2% pay revenue tax,” as if the opposite 98% are simply sitting round avoiding taxes.

We’ve to see issues in right mild.

• Most of that 98% can’t pay revenue tax as a result of they’re both too younger, too previous, not working, or incomes too little.
• Out of the 36.67 crore who’re working and incomes, 7.54 crore filed revenue tax returns in FY 2023-24, that’s 20.6% of the working inhabitants.
• Out of these 7.54 crore filed returns, 2.81 crore really paid tax (7.67%).

That’s not a small effort, particularly when you think about that most of the remaining 29.86 crore (36.67 – 7.54) are incomes beneath the taxable restrict. An enormous majority of our working inhabitants can also be engaged in casual jobs like farming or small retailers. In these areas, tax compliance is hard (authorities’s function is essential right here).

Plus, we’re all paying oblique taxes. Right here is the information I’ve collected from the division of income.

That Rs.9,57,032 crore from GST in FY 2023-24 didn’t come from skinny air, it got here from each single one in all us shopping for every day necessities.

So why can we get labeled as tax avoiders? It looks like a slap within the face, particularly once we’re rising our revenue tax contributions at 15.6% per 12 months and paying GST on the whole lot we purchase.

A Fairer Approach to Have a look at It

Right here’s how I believe we should always inform this story:

• Out of India’s 143.81 crore folks, solely 25.5% (36.67 crore) are working and incomes. Of these, 7.67% (2.81 crore) paid revenue tax in FY 2023-24. That’s a significantly better quantity than 2%, proper?
• Private revenue tax has grown at 15.6% per 12 months for 29 years—quicker than the Sensex (11.58%) and GDP development (10-11%). We taxpayers are stepping up, 12 months after 12 months.
• Oblique taxes like GST make up 43.28% of complete tax income (Rs.14,95,911 crore). Each Indian pays these taxes, whether or not they’re a child shopping for a chocolate or a senior citizen shopping for medication. We’re all contributing to the nation’s development.

So, as a substitute of claiming, “Solely 2% pay revenue tax,” why not say: “7.67% of India’s working inhabitants pays revenue tax, and their contributions have grown at 15.6% per 12 months for almost three many years. Plus, each Indian pays oblique taxes, which make up 43.28% of the federal government’s income.”

Doesn’t that sound extra honest? It offers credit score to all of us for the function we play in constructing our nation.

Change the Narrative

I’m bored with listening to that we Indians don’t pay taxes. It’s not true, and it’s not honest.

We’re paying, whether or not it’s by revenue tax, GST, or Customs responsibility. We’re rising our contributions quicker than the inventory market. And even when solely a small group pays revenue tax, they’re carrying an enormous burden, the highest 1% pays 50% of it.

So, let’s cease with the “tax avoider” label and begin recognizing the hassle we’re all placing in.

Subsequent time somebody says, “Solely 2% pay revenue tax,” inform them the actual story. Inform them in regards to the 15.6% development in revenue tax, the 43.28% from oblique taxes, and the truth that most of us are contributing in a method or one other. We’re not tax avoiders—we’re taxpayers, and we’re pleased with it.

What do you suppose, buddies? Have you ever felt the identical approach about this “2%” narrative? Let’s speak about it within the feedback, I’d love to listen to your ideas too.

[Note: Writing this blog felt personal because I’ve heard the “tax avoider” label thrown around too many times. But the numbers tell a different story, one of effort, growth, and contribution. We Indians are doing our part, and it’s time the narrative reflects that. So, let’s share this story, and take pride in being taxpayers – direct or indirect. After all, every rupee we pay is helping build a better India, isn’t it? Experts, give us that credit please.]