The tax system has a direct relationship with economic development. The tax revenue is for the health, infrastructure and education. The tax system depends upon GDP, population, administrative considerations, macroeconomic policies, and inflation. Middle Eastern countries and North Africa do not collect high charges of personal income taxes. The GDP revenue from the personal tax is less than two per cent in these countries. Other countries collect 10 to 60 per cent of the tax. India collects 42.74, Canada 33, US 37, Finland 56.95, France 45, UK 45, Germany 45, Hong Kong 15, China 45, Singapore 22, Japan 55.97, Australia 45, and Singapore 22 per cent of tax charges. Henley Private Wealth migration report, London, says in 2023, around 6,500 high net worth individuals leave India. The tax system generates revenue and attracts people around the country. The blog intends to bring out potential points about the Indian tax system.
Indians prefer Australia, the US and Canada to migrate. The personal Income tax is higher in these countries. The US charges 51.6 per cent, Canada charges 54 per cent, and Australia charges 45 per cent. India is charging 30 per cent only. The personal income tax rate is comparatively low in India. Around 15 countries participating in the G20 forum have a high personal income tax rate. Economic cooperation and development are addressing the issues arising out of globalisation and digitalisation. The tax concept in India is not troubling the citizens. Other factors such as work-life balance, standard of living and earnings are bothering the Indian citizens.
2022 Tax revenue:
The tax collection from 2022 to 2023 exceeds the perception of the government. From 2021 to 2022, the collection was 14.121 lakh crore. The budget estimation was 14.2 lakh crore. The tax collection was 17.63 per cent high. The revised direct tax revenue by the union budget was 16.5 lakh crore. The tax revenue was the contribution from income tax, wealth tax, corporation taxes, GST, union excise duties, and taxes from union territories. In 2023, the total number of ITRs is 6.77 crore. The recorded data showed a hike in the ITR of 16.1 per cent. The reliance industries stand as the highest corporate taxpayers from 2022 to 2023. The tax payment from reliance industries was 20.713 crore. The direct tax collection for the 2023 year till August 10th was 5.84 lakh crore.
Comparison of tax in India and other countries:
The cost inflation index is a means to understand the inflation in the country. The capital gain taxes are fixed after checking the cost inflation index. The personal income tax and purchasing power of the taxpayers have a relationship. India fixed the tax rates after analysing various factors. The tax system in India works with a progressive tax slab system. The three age groups paying tax in India are taxpayers, senior taxpayers and super senior citizens. The senior citizens and super senior citizens get a high level of exemptions. The surcharge depends upon the level of income. The cess from health and education is charged with 4 per cent from tax and surcharge. The individual taxpayer has two options to manage the income tax. One is a concessional tax regime, and the other one is an existing tax regime.
China and South Africa have tax slabs of 45 per cent for personal income. India charges a tax of 42.74 for personal income. India charges thirty per cent for corporate tax. The global tax rate is 15 per cent. Section 80C allows for a deduction from investments and expenses. The deductions claimed by the taxpayers are as follows: tuition fees of children, employee provident fund, and life insurance premium. The USA, Japan and Canada follow a progressive tax system like India. Some countries come under a flat tax rate system. The tax rate is almost the same in all the countries. The difference is with the rebates, deductions, and exemption limits.
Income tax and other industries:
Income tax contributes to the growth of real estate, mutual funds, the equity market, debt market and GDP. In the real estate business, the indexation reduces the tax amount as per inflation. Indexation is calculated with the formula of the index for the year of sale divided by the index for the year of purchase and multiplied by the cost. The amount of capital gain is reduced with this concept. The indexation benefit lowers the tax payment by twenty per cent. It increases the purchase price, and profit and reduces the tax.
In the case of Gold and bonds, the indexation is calculated if the ownership is for 36 months. The investment gets a reduction of twenty per cent. The government encourages investments with indexation and home loans. Home loans are shown as a deduction in the personal income tax.
The tax-to-GDP ratio in India is 10.2 per cent. The ratio is an indication of managing the expenses in the budget. Tax collection in India has shown an increasing trend for the past thirty years. The components of tax have an impact over some time. GDP and tax collection correlate. In the global market, the tax-GDP ratio shows the growth and tax administration in a country. The Tax-GDP ratio of different countries from the 2017 year are as follows: China 20.1, India 17.7, Brazil 34.4, South Africa 26.9, and Russia 19.5. Rich countries get more share from personal Income tax as the per capita income is higher. India is gaining around 66 % of tax from indirect taxes. The revenue from direct tax is comparatively less in India.
The reason for Indians migrating to other foreign countries is the quality of life not for the monetary benefit. The expansion of the IT industry, political ties and business opportunities are the reasons for the migration. In the last three decades, Indian women have immigrated in large numbers to foreign countries. Around 48 per cent of the migrants are women. The immigration shows the freedom and education of women in India. Per capita income and personal income tax collection is the major source of revenue in foreign countries. According to the tax system, Individual growth has a substantial part in the development of the economy.