'Two Class' distribution of income in India: Evidence from income tax data (2012-13)

Results from the 2012-13 income tax data reveal that Indian incomes, particularly high salaries and wealth-related income, are statistically distributed into two distinct classes. The bulk of the reported income distribution can be explained by an exponential distribution, while a small fraction at the top follows a more unequal power law (Pareto) distribution. This distinction has important implications for inequality, and provides a point of comparison with similar statistical regularities observed in rich countries.