Examining the 2022 Budget for Income and Corporate Tax: A Modest Review

The 2022 budget, presented by the Modi government, has garnered considerable attention for its tax policy changes. These changes have sparked debates, especially regarding the reduction in corporate tax rates for certain industries, often misinterpreted as a reduction in income tax slabs for individuals.

The True Nature of Tax Reforms in the 2022 Budget

One of the key points of discussion has been the reduction in corporate tax rates from 18% to 15% for select industries, such as those owned by business tycoons like Reliance Industries and Adani Group. However, it is crucial to understand that the reduction was not in the regular corporate tax but pertained to the Minimum Alternate Tax (MAT) scheme. This means that while corporate entities saw a tax reduction, the standard business environment did not experience a similar reduction in tax burden.

Income Tax Slabs and the Working Class

It is often overlooked that the number of individuals who actually pay income tax constitutes a very small percentage of the working population. According to statistics, out of the roughly 100 crore working-age individuals in India, only about 9 crore file income tax returns, and only an approximate 50% of these pay any tax. This brings the number of actual tax payers to around 4.5 crore, which is a mere 0.04% of the total population.

Furthermore, these tax payers are from diverse geographic, caste, and religious backgrounds. Many of them, approximately 25%, do not even vote due to their transitory nature, as they do not reside permanently in the locations where their names appear on voter lists. This demographic group, therefore, does not have significant political power to influence election outcomes.

The Impact of Tax Policies on the Larger Population

The government recognizes that the group that directly pays taxes is a small and less politically influential segment. Consequently, policies like the income tax on individuals are strategically aimed at these segments, often referred to as the 'middle class' or 'working class.' These policies include:

Quality Education for Children - X Affordable Health Care - X Social Security against Job Loss - X Support on Death of Earning Member - X Housing Support for Decent House - X Retirement Support - X

From this class of individuals, the government surprisingly extracts the last drop of income through various means, including:

Income Tax: Pay Goods and Services Tax (GST): Pay High Utilities and Fuel Costs: Pay Children's Education: Pay Insupported Health Care: Pay Inflation Burden: Pay Rising Interest Costs: Pay

These policies and taxes are meticulously crafted to ensure the government receives a satisfactory revenue stream while marginalizing the tax liabilities of the large business conglomerates like Reliance Industries and Adani Group. This strategy further cements the government’s focus on prioritizing the interests of the larger tax-paying population and industries over the corporate sectors in tax policy reforms.

Conclusion

The 2022 budget reflects a nuanced approach by the Modi government, targeting specific tax incentives for corporate sectors while maintaining a strict tax regime for the broader working population. Understanding these policies is crucial for comprehending the economic landscape and political priorities of the current government.