I-T surcharge likely on income ABOVE Rs 1 crore

Those with taxable income of more than Rs 1 crore (Rs 10 million) a year could be in for taxing times, with the government considering an surcharge on the “super-rich” in Budget 2013-14, to boost its revenue.

The government is undertaking an exercise to estimate how much more tax can be collected if a surcharge is imposed on either of the two brackets - individuals with income above Rs 50 lakh and those above Rs 1 crore. There are 410,000 people with income above Rs 20 lakh. However, no public data are available for those in the Rs 1-crore-plus bracket.

Finance ministry officials said to levy a tax on the super-rich, it was important to first define the term. The government is cautious the threshold is not so high that the tax department gets little revenue boost or so low that it hurts a large chunk of the taxpayer base.

“We have to see how to define super-rich. A leading industrialist and his assistant pay the same tax,” said an official, asking not to be named.

Also, in a pre-Budget meeting with Finance Minister P Chidambaram, an economist is learnt to have complained he and one of the richest business tycoons in the country were paying tax at the same rate.

A surcharge is an additional levy on a tax an individual pays. For example, if the tax on an income of Rs 1 crore is Rs 30 lakh (Rs 3 million) and a surcharge of 10 per cent is levied, the total tax liability on the taxpayer would be Rs 33 lakh. (Rs 3.3 million)

The ministry might not tinker with the existing I-T slabs. It fears raising the exemption limit from the current Rs 2 lakh would take many people out of the tax net, besides implying a higher exemption for all taxpayers and higher revenue loss for the government.

Currently, tax is levied at 10 per cent on annual income between Rs 200,000 and 500,000, and at 20 per cent between Rs 5 lakh and 10 lakh (Rs 1 million). Income above Rs 10 lakh is taxed at 30 per cent.

A tax on the super-rich with income over Rs 1 crore might not add much to the government’s revenues, but it would send a signal that it is looking to protect the poor and tax the rich.

Though most of India Inc has opposed tax on the super-rich at a higher rate, Wipro chairman Azim Premji recently supported it, saying it sounded a right political move. Prime Minister’s Economic Advisory Council  Chairman C Rangarajan had also said a surcharge should be added for income above a particular level.

The finance minister himself had told a TV channel that the argument that very-rich should be asked to a pay a little more should be considered.