Progressivity and redistributive effects of income taxes: evidence from India

Gaurav Datt, Ranjan Ray, Christopher Teh

Research output: Contribution to journalArticleResearchpeer-review

Abstract

We analyse the progressivity and redistributive effects of India’s income tax system utilizing Income Tax Department data for 2011–18. By fitting Lorenz and tax concentration curves to these data, we find that despite exhibiting high levels of progressivity, the redistributive effects of income taxes remain modest amongst tax assessees and miniscule within the adult population. We also find that plugging the gap between statutory and actual average tax rates will do little to improve redistributive effects, and lowering income thresholds for top marginal tax rates offers greater redistributive and revenue potential than reducing exemption limits or increasing top marginal tax rates.

Original languageEnglish
Pages (from-to)141-178
Number of pages38
JournalEmpirical Economics
Volume63
Issue number1
DOIs
Publication statusPublished - 2022

Keywords

  • Concentration index
  • India
  • Inequality
  • Tax progressivity

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