New Delhi: India’s super-rich will now shell out more tax than their counterparts in the United States, with the government hiking the surcharge on taxpayers earning more than Rs 5 crore. The individuals in this bracket could be taxed up to 42.7%, more than the 40% tax levied on the super-rich in the US.
In her first budget, finance minister Nirmala Sitharaman raised tax surcharge on high net worth individuals (HNIs) with annual income between Rs 2 crore to Rs 5 crore a year by 3%. The surcharge for those earning more than Rs 5 crore was increased by 7%.
“We have taken several measures in the past to alleviate the tax burden on small and medium income-earners as those having annual income up to Rs 5 lakh are not required to pay any income tax. We are thankful to the taxpayers who play a major role in nation building by paying their taxes,” she added.
“However, in view of rising income levels, those in the highest income brackets, need to contribute more to the nation’s development. I, therefore, propose to enhance surcharge on individuals having taxable income from Rs 2 crore to Rs 5 crore and Rs 5 crore and above so that effective tax rates for these two categories will increase by around 3% and 7%, respectively,” she added.
This surcharge would be over and above their marginal tax, which for the Rs 5 crore+ category is 30 per cent. This comes up to an effective rate of 41.1 percent rate (Rs 30 tax on every Rs 100 earned, plus another 37 percent on Rs 30, which is Rs 11.1). Add to that the various cess, and the peak tax rate comes up to 42.7 percent.
The surcharge on the super-rich would help garner additional income of around Rs 12,000 crore this fiscal on the direct tax side.
In her budget speech, Sitharaman said measures are being worked out to ease filing returns and tax compliance. Taxpayers with an annual turnover of less than Rs 5 crore will have to file only quarterly returns, she said.