Lump-sum taxation

Lump-sum taxation refers to a tax system in which a person or business pays a predetermined, fixed amount, irrespective of their actual earnings or profits. The liability remains constant, even if income fluctuates. This approach is often adopted in situations where measuring true income is difficult or when authorities aim to simplify tax administration. Because the tax is unrelated to earning levels, it generally does not influence an individual’s choice about how much to work or produce.

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For example, a street vendor might be asked to pay an annual tax of ₹5,000, whether their earnings for the year are ₹50,000 or ₹2,00,000. Likewise, certain countries levy a flat yearly charge on foreign residents for the privilege of living there, without considering their income.