Inflation and Personal Income Tax- A Note

It is not true that our income tax has fatally ignored the effects of inflation. More often than not the limit has moved up more than was necessary to neutralise the inflationary impact. The harden on the lowest and the highest levels has also been neutralised. It is the middle ranges which hate suffered a higher tax incidence because of inflation. However, to regard this as an undesirable development is to assume that the pattern of graduation prevailing earlier was optimal, whereas it can he argued that the incidence of 12.3 per cent on an income of Rs 30,000 at 1970-71 prices (Rs 72,200 at 1981-82 prices) was too low to begin with.