Budget 2019 India: The government is estimating that the higher super rich surcharge would accrue about `12,000 crore a year on income assessed in FY20, which is largely in line with FE’s analysis.
Budget 2019 India: The country’S super rich will now be paying higher taxes as the Union Budget has proposed to enhance surcharge on individuals having taxable income from above `2 crore to `5 crore by around 3% and those with taxable income of above `5 crore by 7%.
So if someone is earning above `2 crore up to `5 crore, tax rate will be around 39% and for somebody with more than `5 crore, the effective rate would be 42.74% and that’s a pretty steep jump.
For taxable income above `50 lakh up to `1 crore, the surcharge will be 10% while for those with taxable income exceeding `1 crore up to `2 crore the surcharge will be 15%.
At present, there is 10% surcharge on taxable income from above `50 lakh up to `1 crore and 25% surcharge on taxable income above `1 crore.
An analysis on this category of taxpayers based on the income declaration made in FY17 shows that the higher incidence would yield about `9,000 crore for the government. The government is estimating that the higher super rich surcharge would accrue about `12,000 crore a year on income assessed in FY20, which is largely in line with FE’s analysis.
Homi Mistry, partner at Deloitte India, said, “I think people in that category have to pay much more tax. The whole idea is redistribution of wealth or bringing equality. Perhaps the finance minister feels that since we are giving concessions to certain categories of people in India, obviously it will lead to some loss of revenue. So levy higher tax on people who can afford to pay it.”
Finance minister Nirmala Sitharaman in her Budget speech stated that, in view of rising income levels, those in the highest income brackets need to contribute more to the nation’s development.
“The super rich have been taxed royally in Budget 2019. There has been an exponential increase in the surcharge rate proposed by the Finance Bill No. 2 of 2019, wherein the highest surcharge rate has been proposed at 37% for those having total income exceeding `5 crore and at 25% for those having total income from above `2 crore up to `5 crore.
This will result in overall increase in the tax rate of 3% to 7%, said Suresh Surana, founder, RSM India. “While this measure shall have a limited impact as the number of taxpayers in the country having income above `1 crore is approximately 1,40,000 as per the recent CBDT data, their economic influence is much greater.”
The overall tax slab rates have not been changed in this Budget.