Why salaried professionals pay 30% tax while the wealthy often pay less -- expert shares clever tip
Why do salaried professionals routinely fall into the 30% tax bracket while many wealthy individuals report far lower effective tax rates? The answer, experts say, lies less in evasion and more in how income is structured under existing provisions of the Income Tax Act. As India’s tax base widens, the contrast between fixed salaried taxation and flexible wealth structuring is drawing sharper scrutiny.
- Feb 24, 2026,
- Updated Feb 24, 2026 4:07 PM IST
Tax structure: Why do many salaried professionals find themselves in the 30% tax bracket, while wealthy families often report significantly lower effective tax rates?
According to Chartered Financial Analyst Sanjay Kathuria, the answer lies not in illegality, but in structure. “Same country. Same tax laws. The difference is how income is structured,” Kathuria explains, pointing to provisions within the Income Tax Act that are fully legal yet underutilised by most salaried taxpayers.
Kathuria points to several fully legal structures that help reduce effective tax rates. Under Section 56(2)(x), gifts from parents to children are completely tax-free, with no upper limit. High-value assets — property, vehicles or investments — can be transferred within family without triggering tax. “It’s explicitly written in law,” he says.
He also highlights LLP structures, where income can be split between partners and profits taxed at the firm level. Business expenses such as salaries, rent, travel and equipment are deducted before tax, unlike salaried income, which offers limited flexibility.
The HUF structure operates as a separate tax entity with its own exemption limits and deductions, allowing income distribution across family units.
Additionally, agricultural income under Section 10(1) is fully exempt. Business owners can further reduce taxable profits by claiming legitimate expenses — from equipment to software and salaries.
He begins with Section 56(2)(x) on gifts to family. Aishwarya Rai Bachchan reportedly gifted her daughter Aaradhya a red BMW Mini Cooper S and a Dubai holiday home worth over ₹50 crore. Tax paid? Zero. Under the law, gifts from parents to children are fully tax-free, with no upper limit, and luxury assets are included. “This is not a loophole. It’s written into the Act,” Kathuria notes.
Next, he highlights LLP structures, reportedly used by celebrities like Virat Kohli and Anushka Sharma. LLPs allow income splitting between partners, profits taxed at the firm level, and deduction of legitimate business expenses — equipment, staff salaries, travel, and investments. “That’s tax efficiency at scale,” he says.
The HUF (Hindu Undivided Family) structure is another example. Business families, including the Adanis, use HUFs as separate tax entities. An HUF has its own ₹2.5 lakh basic exemption, ₹1.5 lakh 80C deduction, and separate capital gains computation. One family can legally operate multiple tax files, lowering overall liability.
Under Section 10(1), agricultural income is fully exempt. MS Dhoni’s 40-acre Ranchi farm — spanning dairy, poultry, fruits and vegetables — generates income that is not subject to tax, provided it qualifies as agricultural income.
Kathuria also contrasts business deductions with salaried spending. When a creator like Tanmay Bhatt buys a camera, it reduces taxable profit. When a salaried employee buys the same camera, it is a personal expense with no tax benefit. Studio rent, software subscriptions, travel, and team salaries all qualify as deductions for businesses.
“The tax system doesn’t discriminate,” Kathuria concludes. “Information does.”
What can taxpayers do?
Kathuria emphasises that these provisions are fully compliant with the Income Tax Act. “The issue isn’t discrimination in the tax system. It’s information asymmetry,” he says.
He suggests practical steps:
Form an HUF if eligible
Use family gifting provisions appropriately
Consider LLP structures for freelance or consulting work
Maximise deductions under Sections 80C, 80D, HRA
Consult a qualified chartered accountant for structured planning
“The tax system doesn’t favour the rich. It favours those who understand it,” Kathuria concludes.
Expanding income tax base
India’s expanding income tax base is often cited as evidence of a maturing fiscal system, but the composition of that growth raises structural concerns. Over 90% of income tax returns (ITRs) are filed by salaried, middle-income earners, whose tax liabilities are largely locked in through tax deducted at source (TDS), leaving limited scope for planning or deferral. Meanwhile, high-income individuals and corporates account for a relatively small share of filers, even as effective tax rates for these groups have moderated over time.
Between 2013–14 and 2023–24, individual ITR filings more than doubled—from 3 crore to 7.6 crore—while corporate filings remained largely flat. SBI research indicates that taxpayers earning above ₹10 crore contributed just 2.28% of personal income tax (PIT) in 2020–21, down from 2.81% earlier. For those earning over ₹100 crore, the contribution fell from 1.64% to 0.77%. In contrast, filings in the ₹5–25 lakh salaried bracket tripled. India’s tax structure is thus increasingly “deep in the middle, narrow at the top.”
India’s PIT-to-GDP ratio stands at about 3.5%, far below the OECD average of around 8%. However, unlike OECD countries—where broad-based PIT funds universal welfare—India relies heavily on indirect taxes, which now account for roughly 45% of total tax revenue, compared with 30–35% in advanced economies. Yet public spending on health (1.9% of GDP) and education (2.7%) remains modest.
Tax structure: Why do many salaried professionals find themselves in the 30% tax bracket, while wealthy families often report significantly lower effective tax rates?
According to Chartered Financial Analyst Sanjay Kathuria, the answer lies not in illegality, but in structure. “Same country. Same tax laws. The difference is how income is structured,” Kathuria explains, pointing to provisions within the Income Tax Act that are fully legal yet underutilised by most salaried taxpayers.
Kathuria points to several fully legal structures that help reduce effective tax rates. Under Section 56(2)(x), gifts from parents to children are completely tax-free, with no upper limit. High-value assets — property, vehicles or investments — can be transferred within family without triggering tax. “It’s explicitly written in law,” he says.
He also highlights LLP structures, where income can be split between partners and profits taxed at the firm level. Business expenses such as salaries, rent, travel and equipment are deducted before tax, unlike salaried income, which offers limited flexibility.
The HUF structure operates as a separate tax entity with its own exemption limits and deductions, allowing income distribution across family units.
Additionally, agricultural income under Section 10(1) is fully exempt. Business owners can further reduce taxable profits by claiming legitimate expenses — from equipment to software and salaries.
He begins with Section 56(2)(x) on gifts to family. Aishwarya Rai Bachchan reportedly gifted her daughter Aaradhya a red BMW Mini Cooper S and a Dubai holiday home worth over ₹50 crore. Tax paid? Zero. Under the law, gifts from parents to children are fully tax-free, with no upper limit, and luxury assets are included. “This is not a loophole. It’s written into the Act,” Kathuria notes.
Next, he highlights LLP structures, reportedly used by celebrities like Virat Kohli and Anushka Sharma. LLPs allow income splitting between partners, profits taxed at the firm level, and deduction of legitimate business expenses — equipment, staff salaries, travel, and investments. “That’s tax efficiency at scale,” he says.
The HUF (Hindu Undivided Family) structure is another example. Business families, including the Adanis, use HUFs as separate tax entities. An HUF has its own ₹2.5 lakh basic exemption, ₹1.5 lakh 80C deduction, and separate capital gains computation. One family can legally operate multiple tax files, lowering overall liability.
Under Section 10(1), agricultural income is fully exempt. MS Dhoni’s 40-acre Ranchi farm — spanning dairy, poultry, fruits and vegetables — generates income that is not subject to tax, provided it qualifies as agricultural income.
Kathuria also contrasts business deductions with salaried spending. When a creator like Tanmay Bhatt buys a camera, it reduces taxable profit. When a salaried employee buys the same camera, it is a personal expense with no tax benefit. Studio rent, software subscriptions, travel, and team salaries all qualify as deductions for businesses.
“The tax system doesn’t discriminate,” Kathuria concludes. “Information does.”
What can taxpayers do?
Kathuria emphasises that these provisions are fully compliant with the Income Tax Act. “The issue isn’t discrimination in the tax system. It’s information asymmetry,” he says.
He suggests practical steps:
Form an HUF if eligible
Use family gifting provisions appropriately
Consider LLP structures for freelance or consulting work
Maximise deductions under Sections 80C, 80D, HRA
Consult a qualified chartered accountant for structured planning
“The tax system doesn’t favour the rich. It favours those who understand it,” Kathuria concludes.
Expanding income tax base
India’s expanding income tax base is often cited as evidence of a maturing fiscal system, but the composition of that growth raises structural concerns. Over 90% of income tax returns (ITRs) are filed by salaried, middle-income earners, whose tax liabilities are largely locked in through tax deducted at source (TDS), leaving limited scope for planning or deferral. Meanwhile, high-income individuals and corporates account for a relatively small share of filers, even as effective tax rates for these groups have moderated over time.
Between 2013–14 and 2023–24, individual ITR filings more than doubled—from 3 crore to 7.6 crore—while corporate filings remained largely flat. SBI research indicates that taxpayers earning above ₹10 crore contributed just 2.28% of personal income tax (PIT) in 2020–21, down from 2.81% earlier. For those earning over ₹100 crore, the contribution fell from 1.64% to 0.77%. In contrast, filings in the ₹5–25 lakh salaried bracket tripled. India’s tax structure is thus increasingly “deep in the middle, narrow at the top.”
India’s PIT-to-GDP ratio stands at about 3.5%, far below the OECD average of around 8%. However, unlike OECD countries—where broad-based PIT funds universal welfare—India relies heavily on indirect taxes, which now account for roughly 45% of total tax revenue, compared with 30–35% in advanced economies. Yet public spending on health (1.9% of GDP) and education (2.7%) remains modest.