When Playing by the Rules Becomes a Competitive Disadvantage in Investing

Build smart—diversify, invest in transparent assets, avoid the cash economy; honesty pays

- Dhirendra Kumar

Last week, I wrote about why young professionals earning ₹20 lakh a year—among India's top 5%—can't afford basic homes in metros. The mismatch between incomes and prices pointed to "invisible buyers" using black money to inflate real estate values. The response was overwhelming. Readers shared stories pointing to something deeper: a parallel economy where tax evasion is widespread and often rewarded—making honesty a disadvantage when building wealth.

Consider one response: a mutual fund distributor said he pays 32% income tax and 18% GST, while vendors earning lakhs via UPI face little tax scrutiny. This points to a deeper issue—when honest taxpayers face near 50% effective tax rates while others pay none, the playing field is skewed. Their compliance lowers their real purchasing power.

As a result, those with the most capital to invest are often not the most productive, but the best at evading taxes—leaving salaried taxpayers priced out of key opportunities. Real estate is just one example of a wider distortion. From private equity to art to traditional businesses, cash deals often sideline honest taxpayers. Entrepreneurs who fully disclose income lose out to those operating with parallel books.