India has a better income tax structure than China. Here are the details

India and China are two biggest economies in the Asian region and both the nations have always been compared time and again on GDP, taxes, startups, ease of doing business etc.

In India, there is a concrete structure for taxation and the main body which collects taxes is Central Board of Direct Taxes (CBDT).

In China too, tax is the most important source of fiscal revenue. After the tax system reform in 1994 and the fine-tuning of it in subsequent years, China has preliminarily built up a tax system adaptable to the socialist market economy, which has been playing an important role in assuring China's fiscal revenue, broadening the opening to the outside world.

When it comes to individual tax, direct taxes are levied exclusively by the Centre.

Currently, the peak tax rate of 30% is made applicable over an income of Rs. 10 lakh for individual taxpayers. However, the income level on which peak rate is applied in other countries is significantly higher. Hence, there is a need for further raising the income level on which the peak tax rate would trigger, to make the same compatible with the international standards.

Today, a little over half of the Indian Government’s aggregate tax revenue comes from direct taxes.

India is doing far better than some countries, for instance China.

According to World Bank data in 2014, China had a per capita income of $7,380 as compared to India’s $1,570. Yet, India’s direct tax collection as a proportion of GDP was higher than China’s 5.3%.

The tax on an individual's income in China is progressive. An individual's income is taxed progressively at 3% - 45%.

Meanwhile, as per FICCI recommendations, individuals having income upto Rs 3 lakh should not taxed.

The Finance Act, 2016 has levied surcharge @ 15% on individuals having total income exceeding Rs. 1 crore. The surcharge @ 10% on individuals having taxable income above Rs. 1 crore was introduced in the Budget 2013-2014 though only for a year. The surcharge on individuals has been increased over the years from 10% to 15%. It is observed that the increased surcharge on certain category of individuals distorts equity and tends to discourage entrepreneurship and incentivizes people to relocate to other locations.

FICCI suggested that the Union Budget 2017-2018 should withdraw the levy of surcharge on individuals having income above Rs. 1 crore.