Income tax: Are salaried people innocent?

Yesterday I was talking to a colleague. He was quite unhappy as government is not rolling back the hike in petrol price. He explained how petrol is costly in India and state and center government almost put 100 percent tax on it.

I explained reducing petrol price will affect the oil companies. Government will anyway collect tax. Reducing tax to maintain the price is one of the options. But it has other implications such as fiscal deficit. Then he explained how only salaried class is only paying tax where as others are evading it. And how government spends money for freebies which adds to fiscal deficit. And the talk went on.


I agree with him that government should ensure people pay right tax, but do not agree with him that salaried people are honest in paying tax. As there is deduction at source, most salaried people can't do much in evading tax. However many company structure their salary, so that the tax paid will be less. Some of the money they pay as fringe benefits in stead of salary. People forge their rent receipt to evade tax. People go and make forge medical bills to avoid tax and so on. So salaried employee evade the limited amount of tax that they can and businessmen do it with more as they have a better scope of evading tax.

We the salaried people make bulk of the purchase from the shop. My personal observation is most people prefer not to pay sales tax and get the duplicate bill/no bill. By doing so, we encourage the businessman not to show his income and go ahead cheat.