Column : What constitutes ‘income’?
From the figures reported in the Standing Committee Report, we can derive an average tax paid for each of the categories and corresponding to this the average income based on tax rates too can be computed. It may be noted that the income tax slabs underwent significant change in 2010-11. The Standing Committee Report is based on estimates for the year 2011-12: since the report was submitted in March 2012, and reports interactions with the revenue department in 2010, it is fair to expect that the data provided to the Standing Committee would be projected from information available for the year 2009. The change in the tax slabs results in a reduction in the tax liability corresponding to any given income. In the accompanying table, income 1 is computed using tax slabs for 2009 while income 2 has been computed using tax slabs for 2010-11. The table illustrates the difference: average income 1 and effective tax rate 1 relates to tax slabs in force for 2009-10 and average income 2 and effective tax rate 2 pertain to 2011-12.
What should be noted is that while for the first two categories, the average income computed lies in the specified range (R0-5 lakh and R5-10 lakh, respectively), the average income for the third category lies outside the range, since it is less than R10 lakh. The table being based on the application of statutory tax rates alone, the average income
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