Column : What constitutes ‘income’?
While analysing the income and tax data provided by the income tax department, therefore, it is important to understand which definition of income is being referred to and what can be inferred from the same. Two columns—“The taxation silly season is here” (http://goo.gl/JjtNI) and “Blinded by tax revenue” (http://goo.gl/VTDvB)—have raised some interesting issues with respect to income taxation, veracity of data and effective tax rate faced by the different income categories. Both the columns refer to data given by the Standing Committee Report on the Direct Taxes Code submitted in March 2012.
In order to begin analysing the data in the Standing Committee Report, it is essential to decide which definition of income has been used to classify the returns. Let us assume that “C” defined above is used. In such a case, for calculation of tax, the only step left is application of the tax rates at the relevant tax slabs. Clearly, apart from the impact resulting from any progressivity of the tax system, there
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