This is how India's richest are hiding their money
What's the story
A recent study has revealed a disturbing trend among India's richest, who are allegedly paying taxes that are only a fraction of their wealth.
The study, by Ram Singh, who is a member of the RBI's Monetary Policy Committee and Director of the Delhi School of Economics, found that these super-rich often declare significantly lower incomes against their massive assets.
This leads to minimal tax contributions, with some paying as little as 0.7% on their wealth.
Evasion
Tax avoidance prevalent among affluent individuals
Singh's analysis, based on affidavits of Lok Sabha election candidates, Forbes's rich list, and income-tax data, found that a large chunk of these rich people's capital income doesn't show up in their tax records.
The study found that as a taxpayer's wealth increases, their share of tax paid against their total wealth decreases.
"For the wealthiest 0.1% of individuals, the tax liability amounts to approximately 0.7% of the wealth," Singh said in his research paper.
Income-wealth ratio
Wealth-to-income ratios reveal tax avoidance
The study emphasizes that the wealth-to-income ratios disclosed by India's richest are much lower than the return rates on their assets.
A 1% increase in family wealth translates to an average decline of over 0.6% in the disclosed income-wealth ratio, Singh's research found.
The paper contends that tax avoidance is a key reason behind these low income-wealth ratios among India's ultra-rich.
Stats
People under media scrutiny pay higher taxes
The research indicates that those under media and civil society scrutiny are more likely to report their incomes accurately.
The findings reveal that the wealthiest 5% of individuals pay less than one-fifth of their capital income as tax, while for the top 0.1%, it's about one-10th.
Singh's study also found that the super-wealthy Indians on the Forbes list pay just 5% of their capital income as tax, further highlighting the issue of tax avoidance among this group.