Paying income tax – A shared social contract

As I sit down to file my income tax return, a strange heaviness fills my heart, not because of the numbers or procedures … but the feeling that I’ve done my part – yet it never seems enough. The recognition evokes a mixed feeling… On the one hand, it is heartening to play a part in the nation’s development, while on the other hand, it’s natural to wonder how the fate of the country would change if every citizen fulfilled the fundamental duty of paying tax honestly.

The feeling that I am counted among the few who contribute honestly becomes a pain when most of my countrymen walk away from their duty, unbothered and untouched. Paying tax is not simply a financial obligation – it’s a moral one and reflects our commitment to collective progress.

The history of taxes in India is a rich tapestry that reflects the country’s journey from ancient times to a modern globalised economy. From the equitable tax principles outlined in Manu Smriti and Arthashastra to the structured system introduced by the British in 1860 and subsequent amendments, tax laws have evolved over time to meet the changing needs of the economy and governance.

Despite several reforms and amendments, challenges remain … India, with a population exceeding 140 crore, boasts only 1.5 crore active taxpayers. Unfortunately, the salaried middle class disproportionately shoulders the tax burden, while other high-income groups frequently exploit loopholes to minimise or evade responsibilities.

Recent data from the IT Department reveals that merely 8,600 individuals report annual income exceeding Rs 5 crore, and only 43,000 declare income exceeding Rs 1 crore. It is unpleasantly surprising that 2,200 professionals, including doctors, lawyers, and chartered accountants, acknowledge earning Rs 1 crore or more. In stark contrast, 4 lakh individuals earning above Rs 20 lakh contribute to 63% of all Income Tax. This is highly unacceptable. The salaried class is the primary contributor because they cannot hide from their obligations – taxes are deducted at source.

Though there is a marginal increase in the number of taxpayers in the financial year 2024-25, a large part of the population still needs to wake up and contribute, in terms of income tax, for the collective progress of the nation.

Meanwhile, large and affluent agricultural enterprises, rich farmers, and political parties evade their responsibility completely, as they remain outside the tax net, enjoying exemptions and often misusing them. Besides distorting economic justice, it breeds silent resentment among those who pay tax honestly.

Quite often, I discuss with my friends that during my formative years, I used to cycle across town at the tender age of 15 to give tuitions to support my education. Now, when I am one of the substantial taxpayers in town, it’s natural to wonder about the government’s support system, especially during challenging phases of life, when there will be no help waiting, no lifeline for those who give the most … not expecting a bailout, just fairness and dignity. Sadly, there is no such system in place. Honest taxpayers feel undervalued, while evaders escape unscathed. The rich evade, while the corrupt and influential escape.

Every rupee I pay in tax is a rupee I could have saved for my child’s education, healthcare, or a long-awaited holiday that never materialized … I could have used that money for future investment.

It is time for a major and dramatic correction. It’s not only policy that needs change, but also our perception towards taxation.

We can take a cue from countries like Japan and Scandinavian nations, where the policy of taxation is not only transparent and foolproof but honest taxpayers are publicly honoured and bestowed with several privileges. They are the contributors to the financial lifeblood of the country.

If every citizen, without exception, pays tax honestly, it would lead to increased revenue, hence reduced tax burden, and improvement in public services like healthcare, education, and infrastructure development.

Moreover, it would support several social welfare schemes, such as providing financial assistance and healthcare support to the needy and those going through economic downturns. This would also help allow exemptions during difficult times.

Let taxation not be a punishment for the selected few but a shared social contract.

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Disclaimer

Views expressed above are the author’s own.

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