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Income Under-Reporting by Rich Indians: Ram Singh Study

15 April 20251 min read
ECONOMYIncomeUnder-Reportingby Rich Indians:Ram Singh Study15 April 2025safalsetu.com

Why in the news

A study combining national accounts with Lok Sabha MPs’ asset declarations suggests affluent Indians understate income, so real income inequality may be sharper than earlier estimates.

Key facts

  • Author: Ram Singh, director of Delhi School of Economics.
  • Wealth-income link: every 1% increase in wealth goes with a 0.6% decline in reported income relative to wealth.
  • Ultra-rich: Forbes 2021 listed households report income as low as 1/12th of wealth, pointing to concealment to cut tax.
  • Asset types: equity ownership shows a positive wealth-income link; agricultural land and commercial property show anomalous, falling ratios despite higher returns.

MP affidavit check

  • Wealthy Lok Sabha candidates showed the same under-reporting pattern.
  • Candidates with higher vote shares disclosed more accurate ratios, suggesting media and public scrutiny aid transparency.

Concerns

  • The tax system looks regressive: effective income-tax rates fall as wealth rises.
  • Loopholes around agricultural income and property-based revenue; possible under-reporting of rent and farm income.

Way forward

  • Tougher enforcement of disclosure norms and audits for high-wealth individuals.
  • Reforms targeting asset-based income; rethink agricultural income exemptions.

Exam angle

  • Study author: Ram Singh; data: MPs’ affidavits.
  • Key numbers: 0.6% (per 1% wealth rise) and 1/12th.

Test yourself

1. The Ram Singh study estimates what fall in reported income-to-wealth ratio for each 1% rise in wealth?

The paper estimates a 0.6% drop for every 1% rise in wealth.

2. The richest households in the Ram Singh study reported income as low as what share of wealth?

Households such as those in Forbes 2021 report as little as 1/12th.

3. Whose asset disclosures were sampled in the study of income under-reporting by wealthy Indians?

The paper sampled asset disclosures by Lok Sabha MPs.

This topic is part of Daily Current Affairs 15 April 2025 (22 topics).

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