Budget 2024: Do India's richest pay the highest personal income taxes?

How much tax is paid by the rich in India

The upcoming Budget has raised expectations for a personal income tax cut to boost consumption and spur economic growth. Data shows India's top-bracket income tax rates are lower than in many developed and developing countries. It is, however, important to note that countries with higher tax rates, such as France and Finland, often provide a higher level of public services in return.

While Indian taxpayers earning more than Rs 5 crore pay 39% tax under the new regime, which includes a 25% surcharge on income above this threshold, the top earners in Canada pay an average of 50.5% tax, depending on the province, according to PwC data.

For Australia, France, and Germany, the top tax rate is 45%. Germany levies an additional 5.5% solidarity surcharge, whereas France extracts an additional 3% from people earning over 250,000 euros.

Among BRICS countries, China and South Africa levied 45% tax at their top bracket, whereas Brazil levies a much lower 27.5% tax on income at the top level.

Vietnam and the US also levy lower tax rates than India at 35% and 37%, respectively. (see graph)

Do high tax rates kick in too early?

In India, the highest tax rate of 30%, without accounting for surcharges, kicks in at Rs 15 lakh for the new tax regime.

A Moneycontrol analysis shows that the gap between 30% tax rate and the per capita income of the country was highest for India at 7.1 times, followed by Vietnam.

In China, the 30% tax kicks in at 420,000 yuan, which was 3.7 times the per capita income of the country in 2022.

For developed countries, the gap was lower. The 30% tax bracket is applied at $182,101 for the US, which is 2.4 times the per capita income, whereas it is applied at 50,721 pounds in the UK—1.4 times the per capita GDP.

This gap remains significant even when adjusted for purchasing power parity.

The lowest bracket in India was applied at much higher levels compared with other countries at 3.3 times the per capita income compared with 2.1 times in South Africa and 0.14 times in the US.