Delhi School of Economics paper finds stark under-reporting of income by India's richest

A recent academic paper by Ram Singh, director of the Delhi School of Economics, has reignited the global debate on income inequality by offering fresh evidence that India’s may be significantly under-reporting their incomes — an issue that echoes concerns raised at the 2024 G20 summit and in international assessments such as those by French economist Gabriel Zucman and .

Published in the Review of Income and Wealth in May 2025, Singh’s paper analyses national accounts, income tax data, and asset disclosures from Lok Sabha MPs. The Hindu reported that Singh's research reveals that “the wealthier a household is, the smaller the income it reports relative to its wealth.”

In other words, those at the very top of India’s economic pyramid appear to be disclosing disproportionately lower incomes in comparison to their substantial asset holdings — an indicator that income inequality in India may be far more pronounced than previously believed.

The paper quantifies this mismatch, stating that a 1 per cent rise in wealth corresponds to a more than 0.6 per cent drop in the reported income-to-wealth ratio. This trend holds across all forms of declared income, from taxable to capital gains.

Among India’s richest, including families listed in Forbes' 2021 rankings, reported income amounts to just 1/12th of their total wealth — a statistic that, according to Singh, suggests deliberate income concealment to minimise tax liability.

These findings offer new context to the 2024 presentation by French economist Gabriel Zucman to G20 finance ministers in Brazil, where he argued that traditional income taxation structures fail to capture the real earnings of the ultra-rich.

Zucman’s recommendation — a global presumptive income tax based on wealth — stems from the understanding that the richest individuals derive most of their gains not from salaries but from capital assets such as equity, real estate, and private companies.

In his proposal, a 2 per cent tax on wealth equates to a 33 per cent tax on an assumed 6 per cent return, effectively plugging gaps left by income-based taxation.

Zucman’s model aims to counteract the growing inefficacy of conventional income taxes in the face of wealth hoarding and aggressive tax planning by high-net-worth individuals.

His call for an international minimum tax on billionaires would counter capital flight and render tax avoidance via relocation less viable — a concern that has historically stymied wealth tax discussions.

India’s case seems particularly stark. Singh’s paper points out anomalies such as rental yields being under-reported, especially from agricultural land — an area often used to claim tax-free income.

Despite the expectation that rental income would outperform equity dividends, the data show otherwise, hinting at tax evasion through misreporting or exploiting exemptions on farm income.

The affidavits of election candidates showed similar patterns, with one notable deviation: MPs with higher chances of winning, and thus greater public and media scrutiny, tended to disclose income figures more faithfully.

These domestic findings correspond with global observations. Oxfam’s 2024 report highlights that the world’s richest pay strikingly little tax. Elon Musk’s effective tax rate stood at 3.2 per cent, while Jeff Bezos paid under 1 per cent, the report claims. In contrast, ordinary workers in developing countries, like Aber Christine — a Ugandan market vendor — paid up to 40 per cent of her income in taxes.

India’s most prominent tycoon, Mukesh Ambani, has long been emblematic of this disparity. Though the chairman of Reliance Industries has ranked among India’s wealthiest for over a decade, he has never featured in the top 100 income taxpayers.

His self-imposed reduction in annual compensation — from Rs 37 crore to Rs 15 crore — reflects a global trend: for the ultra-rich, income is no longer the main avenue for wealth accumulation. Their wealth grows through ownership structures, passive gains, and tax-exempt avenues.

While Singh’s study does not propose specific policy remedies, it starkly underscores the inadequacy of India's current tax structure in capturing and redistributing wealth.

Previous research by the World Inequality Lab pegged the top 1 per cent of Indians as holding 40.1 per cent of wealth and earning 22.6 per cent of the country’s income — figures that Singh argues may in fact understate the inequality due to income under-reporting.

The convergence of Singh’s findings with Zucman’s G20 proposal and Oxfam’s advocacy signals a growing global consensus: taxing income alone is no longer sufficient. As the wealth gap deepens and regressive taxation structures persist, international cooperation — and bold domestic reform — may be the only path to a more equitable economic future.