REDUCTION IN TAXES; BENEFITS INDIA DURING PANDEMIC

EFFECT ON INCOME DURING PANDEMIC-

The pandemic proved to be a very difficult time. The income of people all around the world drastically decreased. As complete lockdown was implemented in the entire country, the sources of income for a very large amount of people in India were immediately cut down. A large crowd of the public in India had no idea of how they would earn during the pandemic. Hence, the government provided many Yojnas for such groups.

There was another set of people whose income was not cut down but reduced drastically. Although they had little income coming during the pandemic, paying taxes and interests was difficult for them. Keeping in mind the problems faced by the people in India, the government gave many relaxations in many areas including Income Tax. The government reduced the tax rates, interest rates, and much other expenditure.

EFFECTIVE TAX RATE OR ETR-

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  • Effective Tax Rate or ETR is the part or percentage of the income of a person or corporation that they pay in taxes.
  • The Effective Tax Rate is the average rate at which a person or corporation’s earned or unearned income is taxed.
  • It can include salary, wages, commissions, dividends, and many more.

REDUCTION IN ETR IN DIFFERENT SECTORS DURING PANDEMIC-

Reducing the Effective Tax Rates and interests should have caused the ETR collected for the year to decrease, but it was recorded that the ETR collected in 2021 was more than 2020.

  • For more than 4,000 companies the ETR decreased from 35 % in the Financial Year 2020 to 26 % in the Financial Year 2021.
  • In the Financial Year 2020, the tax paid by people was Rs. 1.40 Crores.
  • In the Financial Year 2021, the actual tax collected was Rs. 1.90 Crores.
  • Hence, it can be noted that despite a reduction in the Effective Tax Rates during the pandemic, the actual tax collected by the government has increased; meaning in one year the ETR collection increased by Rs 50,000 Crores.

CHANGE IN EFFECTIVE TAX RATES IN DIFFERENT SECTORS IN INDIA-

  • The ETR in the realty sector declined from 50 % in the Financial Year 2020 to 26 % in the Financial Year 2021.
  • There was a reduction of 3 % in the automobiles sector, which was 36 % in the Financial Year 2020 to 33 % in the Financial Year 2021.
  • There was a decrease of 13 % in the trading sector.
  • In the FMCG and the Packaging sector, there was a reduction of 1 % in the ETR.
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