Who Really Pays Tax in India?
If you think only salaried employees pay taxes, think again. In India, every citizen pays tax — directly through income tax or indirectly through GST, excise, fuel surcharge, and more. The real question isn’t who pays, but how much and in what form.
Let’s decode the tax burden — beyond just income tax.
Understanding India’s Tax Structure
India’s tax system has two broad components:
| Tax Type | Paid By | Examples |
|---|---|---|
| Direct Tax | Individuals, businesses (with income) | Income tax, corporate tax |
| Indirect Tax | Everyone (consumer of goods/services) | GST, excise duty, customs, cess |
Income Tax vs Indirect Tax: Who Bears What?
| Category | Income Tax | GST/Other Indirect Taxes |
|---|---|---|
| Salaried employees | Yes | Yes (on consumption) |
| Small shopkeepers (non-filers) | Often No | Yes (daily purchases) |
| Farmers (income exempt) | No | Yes (fertilisers, FMCG, etc.) |
| Housewives, students | No | Yes (mobiles, OTT, etc.) |
| citizens (low income) | Maybe | Yes |
✅ Everyone pays GST — whether rich or poor, urban or rural.
Expert View: Hidden Taxes You Don’t Notice
Most Indians unknowingly pay more in indirect taxes than income tax. For example:
- Petrol/Diesel: Over 45% of the price is central + state taxes
- Mobile recharges: 18% GST
- Restaurants: 5% or 18% GST depending on the place
- Gold purchase: 3% GST
💡 Indirect taxes don’t care about income — they impact all equally.
What the Data Says (CBDT + CBIC)
- Only ~7.4 crore filed income tax returns in FY 2023–24
- Of them, only 1.3 crore paid actual income tax after deductions
- But 130+ crore Indians pay GST regularly via goods/services
📊 Source: CBDT Annual Report, PIB, and CBIC Revenue Data
Why It Feels Like “Only the Middle Class Pays”
- Salaried people can’t escape TDS (Tax Deducted at Source)
- Others — especially in informal sectors — often remain outside the direct tax net
- But they still pay indirect taxes on almost every expense
🧾 The real burden is in proportion to transparency — not exemption.
Legal References
- Income Tax Act, 1961 – Defines who is liable to pay income tax
- CGST Act, 2017 – Lays down the framework for GST on goods and services
- Constitution Article 265 – No tax can be levied without authority of law
You can explore official data here:
CBDT Statistics – incometaxindia.gov.in
CBIC GST Collection – pib.gov.in
Summary
In India, everyone pays tax — either directly through income tax or indirectly through GST and cess. While only 1.3 crore people pay income tax, over 130 crore Indians contribute to tax revenue daily through fuel, food, services, and telecom bills.
Final Thoughts: What Should You Do?
- Don’t ignore tax just because you don’t file ITR.
- Track how much GST you pay in monthly bills — it adds up!
- If eligible, file your return — refunds and benefits await.
FAQs
Q1. Do farmers in India pay tax?
No income tax, but they do pay GST on goods and services they consume.
Q2. Is GST regressive?
Yes, because the rich and poor pay the same rate on consumption. But basic items are zero-rated or taxed at 5%.
Q3. Can I escape GST?
Only if you stop consuming. Everything from toothpaste to DTH has GST.