Understanding India’s Personal Income Tax: What Every Taxpayer Should Know

Since Prime Minister Narendra Modi’s government started in May 2014, there haven’t been any big changes to the personal income tax rules, which has disappointed many taxpayers. However, they did create a simpler tax system. For people who still use the old tax system, the lowest tax rate was reduced to 5%.

In the new tax system, people pay lower rates but give up certain benefits like deductions for home loan interest, social security, and child education expenses.

Personal income tax is vital for the government because it brings in more money than taxes from companies. But every change in tax deductions can also mean less money coming in for the government.

So, can everyday people complain about how they are treated by the government? Should the government give them more help?

It really depends on who we call “common people.” For this discussion, let’s consider anyone earning up to ₹10-12 lakh a year as common.

Helping with Inflation

Rahul Garg, an advisor from Assocham, says that if ordinary people feel the tax burden, the government should change the tax rates. He noted that last year, some people who chose the new tax plan now pay no taxes at all if they earn up to ₹7 lakh. This means lower-income folks have gotten some relief instead of more burden.Making Taxes Easier

Making Taxes Easier

For many, especially small business owners and start-up founders, following tax laws can be more challenging than the tax rates themselves. They have to handle lots of complicated rules. Mr. Garg believes that simplifying tax rules could help. To make it easier, we could use a system where taxes are based on a set percentage of income.

Why Pay Taxes?

The government uses tax money to give people different benefits, like roads, food support, schools, and healthcare. Taxes also help share resources with those who need them most. According to Mr. Garg, the benefits each person receives are usually greater than what they pay in taxes.

The government must work to ensure that resources are spread fairly among everyone. Most of the income tax comes from people who earn over ₹10 lakh, which is why the government is careful about making big cuts in taxes or changing the laws significantly.