Negative income tax

A Negative Income Tax (NIT) is a system where people with low or no income receive money from the government instead of paying taxes. It uses the existing tax framework to provide financial support directly to those below a certain income threshold.

How it works:

1. If you earn more than the threshold → you pay tax.
2. If you earn less than the threshold → the government pays you a subsidy, called the negative income tax.
3. The subsidy gradually decreases as income rises and stops once income exceeds the minimum guaranteed level.

Example: If the minimum guaranteed income is ₹1,00,000 per year and someone earns ₹60,000, they are ₹40,000 below the threshold. With a 50% negative income tax rate, the government pays them ₹20,000 as a subsidy.