A research based on Lok Sabha election candidates' affidavits; the Forbes' wealthy list and income-tax data demonstrates that the rich in India claim much lower incomes relative to their wealth. A sizable portion of the capital income of wealthy groups does not make it into the income tax data, according to study by Ram Singh, director of the Delhi School of Economics and member of the RBI's Monetary Policy Committee, which determines interest rates.
The research shows that the richer a taxpayer, the smaller the share of income tax paid relative to the wealth. "For the wealthiest, the income-tax liability amounts to about 1 percent of their wealth. For the wealthiest 0.1 percent of individuals, the tax liability amounts to approximately 0.7 percent of the wealth," it said.
“The research argues that the income-wealth ratios reported by the top wealth groups are minuscule compared to the rate of return on their assets. A 1 percent increase in family wealth corresponds to more than a 0.6 percent decrease, on an average, in the reported income-wealth ratio”, it added.
"Do the Wealthy Underreport Their Income?" is the title of the study. Tax evasion is a major factor in the low income-wealth ratios seen among the ultra-wealthy, according to "Using General Election Filings to Study the Income–Wealth Relationship in India." It claims that the tax system in India is not wealth-progressive.
According to the study, those of us who are subjected to scrutiny from the media and civic society are more motivated to disclose our incomes honestly.
The study found that the wealth of the wealthiest households is nearly doubled by the income of the bottom 10 percent of households. However, the richest 1% record revenues equal to just 3-4 percent of their wealth, and for the wealthiest 0.1 percent, the reported income falls below 2 percent of their holdings.
According to the research paper's estimations, the tax due of the wealthiest 0.1 percentile is only roughly one-tenth of their capital income, while the tax paid by the richest 5 percent of people is less than one-fifth of their capital income. Super-wealthy Indians on the Forbes List pay tax equating to a meager 5 percent of their capital income.
"We show that at top wealth levels, the wealthier a taxpayer, the smaller the income tax paid relative to wealth. For the wealthiest centile, the income tax liability amounts to about 1% of their wealth. For the wealthiest 0.1 percent of individuals, the tax liability amounts to approximately 0.7 percent of the wealth. Super-wealthy Indians in the FL [Forbes List] face income tax liability amounting to just 0.4 percent of their wealth. The relative tax liability of the ultra-wealthy groups is lower than that of the middle-wealth groups, even after considering the various exemptions granted to the latter under the tax law," the research says.
"Incomes reported by the bottom 10 percent of wealth groups are several times their wealth. In contrast, income levels reported by the groups at the top of the wealth pyramid are a minuscule fraction of their wealth. The reported income relative to wealth decreases continuously until it is reduced to a negligible fraction of wealth for super-wealthy groups... we expect the income-to-wealth ratios to be decreasing in wealth. Yet, the income-wealth ratios reported by wealthy Indians seem to be inexplicably low”, it added.
