₹15 lakh income, different tax liabilities: Why salaried middle class ends up paying highest tax

India's income tax system treats salary, pension, professional income, and business income under different rules, leading to varying tax liabilities for the same gross income.

Four taxpayers earning ₹15 lakh annually — a salaried employee, a retiree, a freelance consultant, and a startup founder — have tax bills ranging from ₹97,500 to nil under the new tax regime for FY 2025-26.

The salaried employee's taxable income is ₹14.25 lakh after a ₹75,000 standard deduction, resulting in ₹97,500 tax; the retiree's taxable income is ₹12.12 lakh after a 30% standard deduction on rental income, with ₹12,480 tax.

The freelance professional gets a 50% deemed income deduction under Section 44ADA, reducing taxable income to ₹7.5 lakh and tax to nil; the startup founder gets a 6% deemed income on turnover under Section 44AD, with taxable income of ₹90,000 and no tax.

The type of income, not just the amount, determines tax liability, highlighting how the salaried middle class often ends up paying the highest tax among equal earners.