Post the demonetisation phase, the union budget expectations had soared high. The budget to some extent matched the desire of a common man, but it is likely to impact rich taxpayers negatively with the overload of the heavy surcharge. Taxpayers who are earning between Rs.50 lacs to Rs.1 crore have to pay an additional surcharge of 10% on their total income which was not the case earlier. However, there has been no change in the surcharge which is additionally levied at 15% whose income is above Rs.1 crore.
Moreover, taxpayers who are earning taxable income between Rs 2.50 lacs to Rs 3.50 lakhs will now get a rebate of Rs 2,500 under section87A as against the earlier rebate of Rs 5,000 for the taxpayers whose taxable income was up to Rs.5lakhs.
Jaitley said, “The present burden of taxation is mainly on honest taxpayers and salaried employees.” So, in a bid to expand the tax base in the country, he reduced taxes. This initiative has given a rebate of Rs.12500 for all the taxpayers but eventually, to overcome the accounting of less tax, the government announced an additional surcharge of 10% for salaried employees earning more than Rs.50lakhs and less than a crore.
This surcharge has almost increased the net income tax payable by approximately Rs.1.5lakhs.
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To understand it much better, let us consider a hypothetical example of a person who is earning an income of Rs.60lakhs p.a.
In the calculation, you can see that despite paying 10% between the slab of Rs.2.5lakhs to 5lakhs, your tax liability is less compared to the new slab after the budget. It shows that even after getting a rebate of Rs.12500 you have to pay higher income tax.
The additional surcharge at the rate of 10% is very high than the relief of rebate granted by the government. However, it is to understand that in the case of above, on total income exceeding Rs.50lakhs but not exceeding Rs.1Cr, the total amount payable as income-tax and surcharge on such income shall not exceed the total amount payable as income-tax on a total income of Rs.50lakhs by more than the amount of income that exceeds Rs.50lakhs.
This shows that now you have to pay an additional amount of surcharge in lakhs who are having the salary between Rs 50 lakhs to Rs 1 Crs. The surcharge @10% shown above, are calculated after doing certain tax-saving investments, that means if somebody under these salary bracket has not done any tax savings throughout the F.Y, then he can be levied with more amount of surcharge as stated in the second column of chart mentioned above. Earlier there was no additional surcharge applicable for the super rich taxpayers.
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Further, the total amount payable as income-tax and surcharge on total income exceeding Rs.1Cr. shall not exceed the total amount payable as income-tax on a total income of Rs.1Cr. by more than the amount of income that exceeds Rs.1Cr.