What percentage of his income does an Indian middle class person pay?
The burden of total tax is high when income in low, and has an inverse effect for the middle income group, then increases with the increase in income. So let say a household spend around INR 200,000 yearly on these things. Taking Customs, Excise, Service Tax and VAT and Octoi, a weighted average indirect tax can come near 30% approx Following are the Tax Slab of a person paying direct tax, say s/he is a breadwinner. - 2,00,000: No Tax. Hence total tax burden 30%. 2,00,000 - 5,00,000 : 10% Tax. The total tax burden shifts from 30% to 17.75%, as income progresses from 2 Lakhs to 5 Lakhs. 5,00,000 - 10,00,000 : 20% Tax Total burden shifts from 17.75% to 18.87% , as income progress from 5 Lakhs to 10 Lakhs. 10,00,000 onwards : 30 Tax Total burden will increase from 18.87% gradually as the income increases. Here is a graphical representation: (Sorry for a bad graph) The Blue line represents the Income in Lakhs, and Purple line the percentage of total tax burden. Summary: Different income groups have different burden of total tax. Assumptions:1) Tax Slab used is for illustration purpose only.2) The Weighted average indirect taxes are on the bases of Basic consumable goods.