New Delhi, Feb. 7 -- With just about 1% of Indians expected to fund about a third of the government's gross tax revenue next fiscal year, India has a taxation problem. It is not about high rates, but about who actually pays.

The recent Union budget has raised the annual income threshold above which income tax kicks in to Rs.12 lakh under the new tax regime. While this move aims to bolster middle-class spending and stimulate economic growth, it also narrows the tax base as a side-effect, placing an even greater fiscal burden on a small segment of the population.

Only about 10-12 million taxpayers are estimated to be in earning brackets that would require their contribution to the tax coffers. They will bear the responsibility of generati...