after a certain cut-off, then I won’t disagree.” A surcharge is essentially a tax on tax.
Finance minister P Chidambaram recently gave credence to the idea of increasing the tax on the super-rich a bit to address the fall in revenue buoyancy, saying that the “argument was worth considering”. FE had earlier reported on the finance ministry’s plan to have a surcharge for a defined category of super-rich taxpayers and an idea doing the rounds in the ministry to tax the dividend income beyond a certain threshold, say, R20 lakh, in the hands of the receiver also at the same rate as it is taxed at the giver’s end.
Currently, companies pay 15% dividend distribution tax but the dividend is tax-free in the receiver’s hands. If the proposal is cleared, the new impost would be levied only sparingly so that it impacts only the really affluent like promoters of large companies and other significant shareholders.
Listed private companies paid dividends of close to R60,000 crore to promoter groups in 2011-12. This is one chunk, FE had reported, which could be brought under the additional dividend tax.
Currently, the marginal tax rate for people with a taxable income above Rs 10 lakh per annum is 30%. As per information furnished by the finance ministry to the parliamentary standing committee, of the 32.4 million taxpayers, some 400,000 reporting taxable income higher than Rs 20 lakh, paid over Rs 93,000 crore as income tax in 2011-12 while the total personal income revenue stood at around Rs 1.7 lakh crore. This, it is reckoned, indicates the likely robust revenue gains a surcharge on the super-rich would bring. At present, taxpayers also pay an education cess of 3% on the tax paid.