Budget 2013: UPA's boldest direct tax drive targets the rich
In the most aggressive drive in a decade to raise direct tax receipts, finance minister P Chidambaram cast the tax net deeper in the Union Budget 2013-14 to collect an extra R13,300 crore, surpassing the direct tax revenue gains made by his own previous five Budgets. This contrasts starkly with the Budgets presented by his predecessor Pranab Mukherjee, whose direct tax proposals were either revenue neutral or at a net revenue loss. The maximum Chidambaram’s Budgets had earlier sought to raise by way of direct taxes was R6,000 crore in 2005-06.
Turning to the “relatively well placed in the society” to raise resources in a difficult year, Chidambaram proposed surcharge on individuals and companies above certain income levels, introduced a transaction tax in non-farm commodities (CTT) and proposed anti-tax evasion steps. The CTT paid, however, will be allowed as a deduction on income from commodity trade. He also raised the tax on payment of royalty or fee for technical services to non-residents from 10% to 25%.
While he kept personal and corporate income tax rates steady, surcharge has been increased across the board to mop up extra revenue. Individuals with taxable income above R1 crore will have to pay 10% surcharge, making 42,800 people to pay more taxes in 2013-14. “The maximum effective tax rate for such an individual would be 34%,” said Homi Mistry, partner, Deloitte. Firms and local authorities with similar income too have to pay the same rate of surcharge.
In 2013-14, a 10% surcharge to be deducted at source
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