Finance minister P Chidambaram on Thursday proposed a tax cut of Rs.2,000 for people earning an annual income of between Rs.200,000 and Rs.500,000 and said anything beyond that was not possible given the current circumstances.
Presenting the national budget for 2013-14, the finance minister said any hike in the exemption limit for direct tax that is paid by individuals would take millions out of the tax net and was neither a desirable proposition, nor feasible.
Accordingly, he proposed a Rs.2,000 tax credit for those in the first slab.
"This measure will benefit 1.8 crore (18 million) tax payers," he said, adding that this would entail an outgo of Rs.3,600 crore ($650 million) to the exchequer.
Chidambaram said the tax-GDP ratio in the country had slipped to 5.5% for direct taxes and 4.4 percent for indirect taxes. "Our tax-GDP ratio is one of the lowest in the world. We should reclaim 11.9% tax-GDP ratio in the short term."
For the affluent, the finance minister took the cue from what was proposed as the "super rich tax" by Wipro chairman Azim Premji, and said a surcharge of 10 percent was proposed on the those earning more than Rs.1 crore per annum.
"This surcharge will be for one year," the finance minister said, adding there were some 42,800 people who fell in that bracket. "I am sure, there is a little bit of Azim Premji in everyone and this additional burden will be for one year."