Do you know that personal income tax collections in India are higher than corporate tax collections? Yes, you heard it right! Individuals like you (reader) and me together pay more taxes than all the corporations put together.
How can a lower-middle-income country such as India with a per capita income of around $2,500 rely on individual tax collections to fund capex and welfare programmes of the government?
Not surprisingly, not very long back, in the financial year (FY) 2010-11, the scenario was quite different. Corporate tax collections were significantly higher than personal income tax collections. However, the tables have turned over the past decade. This shift raises several questions about the economic landscape and fiscal policies in India.
Understanding the Shift
The increase in personal income tax collections can be attributed to several factors:
- Broadening Tax Base: The government’s efforts to widen the tax base through measures like demonetization and GST implementation have brought more individuals into the tax net.
- Improved Compliance: Enhanced compliance and stricter enforcement have led to higher tax collections from individuals.
- Economic Growth: Despite challenges, India’s economy has grown, leading to higher incomes and consequently higher tax payments by individuals.
The Role of Leases in Corporate Taxation
While discussing taxation, it’s essential to understand the concept of a lease. But
Leases play a crucial role in corporate taxation. Companies often use leases to manage their assets efficiently and optimize their tax liabilities. By leasing assets instead of purchasing them outright, businesses can spread out their expenses over time, which can lead to more favorable tax treatment.
This strategic use of leases can impact corporate tax collections. While companies might reduce their immediate tax liabilities through leasing arrangements, it doesn’t necessarily mean they evade taxes. Instead, they manage their financials within the legal framework to ensure sustainability and growth.
As India continues to evolve economically, understanding these dynamics between personal and corporate taxation becomes increasingly important. The balance between individual contributions and corporate strategies like leasing will shape the future of India’s fiscal landscape.
