India’s super-rich would have to pay more from now on.
In the first full budget of the Narendra Modi government, finance minister Arun Jaitley proposed to abolish the wealth tax, but raised the surcharge on all individuals with a taxable income of Rs 1 crore per annum by 2% to 12%.
Companies, too, with incomes between Rs 1 crore and Rs 10 crore would have to now pay a surcharge of 7%.
The new measures will push tax collection and is expected to fetch Rs 9,000 crore, while only Rs 1,008 crore could be garnered through the wealth tax.
Till now, an individual, a Hindu Undivided Family or a company had to pay a wealth tax of 1% on earnings of over Rs 30 lakh.
“The rich and wealthy must pay more tax than the less affluent ones. I have therefore decided to abolish the wealth tax and replace it with an additional surcharge of 2% on the super rich with a taxable income of over `1 crore,” the finance minister said while presenting the budget. “This will lead to tax simplification and enable the department to focus more on ensuring tax compliance and widening the tax base,” he added.
Further, to track the wealth held by individuals and entities, the information regarding assets that are currently required to be furnished while filing wealth-tax returns will be captured in income tax returns.
The finance minister said the decision to do away with wealth tax was based on the fact that the cost of collection was high while the yield was low. “Should a tax which leads to high cost of collection and a low yield be continued or should it be replaced with a low cost and higher yield tax?”.
“The super-rich will cough up more taxes as enhanced surcharge of 2%... this more than compensates the loss of revenue to exchequer by abolishment of wealth tax. The peak tax rate for the super rich is raised from 33.99% to 34.61%,” said Parizad Sirwalla,head of global mobility services, tax, KPMG.
Former finance minister P Chidambaram had announced a surcharge of 10% in 2013 for individuals with annual incomes of Rs 1 crore or above. According to estimates, 42,800 people came in this category.