With just hours left for the Union Budget 2026 presentation, income tax once again takes centre stage as taxpayers across the country expect more income relief, a simpler tax structure and several other benefits. Amid discussions and expectations around taxes, let’s take a look at how India’s income tax system truly compares with those of other countries.
Here’s how income tax in India compare with major economies such as the US and the UK —
Minimum income tax rates
India provides a lower minimum slab rate of 5%, while the United Kingdom and the United States impose minimum income tax rates of 20% and 10%, respectively. “At the lower end of the income spectrum, India offers a relatively favourable entry point to taxpayers,” according to Chandni Anandan, Tax Expert at ClearTax.
Maximum income tax rates
The higher income tax rates vary significantly across countries. India imposes a maximum income tax rate of 30%, making it a moderate-tax economy, as per the expert. In comparison, the US levies a marginal income tax rate of 37%, while the UK has the highest at 45%. These rates do not include surcharges, cess, penalties, or other additional taxes.
A look at deductions
According to Anandan, India provides a variety of deductions under the old tax regime, promoting savings through insurance, provident funds, and long-term investments.
Similarly, the US is seen as a deduction-rich tax system, giving taxpayers the option to choose between a flat standard deduction and itemised deductions for charitable contributions, mortgage interest, and specific state and local taxes, the expert noted.
Meanwhile, the UK follows a relatively simple tax structure with comparatively limited deduction options, such as charity donations and retirement contributions.
How do capital gains vary?
With a market cap of $5.32 trillion, India imposes a 12.5% long-term capital gains tax. In contrast, the UK applies capital gains tax rates of up to 24%, while the US levies a capital gains tax rate of up to 20% based on income.
“Capital gains taxation further highlights India’s competitive positioning. Despite being a large equity market with a total market capitalisation of approximately $5.32 trillion, India levies long-term capital gains tax at 12.5% on specified assets. In contrast, the United Kingdom taxes capital gains at rates of up to 24%, without a distinction between short-term and long-term holdings,” the tax expert said.
Apart from this, many major economies, such as the US, UK, and Japan, levy social security or payroll taxes alongside income taxes, which significantly increase the effective tax burden on individuals. In contrast, India does not impose a comprehensive social security tax on individual earnings.
Disclaimer: This story is for educational purposes only. The views and recommendations made above are those of individual analysts or experts, and not of Mint. We advise investors to check with certified experts before making any investment decisions.
