Middle class gets a ‘thank you’ from FM, super rich a higher surcharge
Finance Minister Nirmala Sitharaman on Friday did not announce any change in personal income tax rates for the middle class in her budget speech but proposed to hike the tax for the super rich.
Sitharaman said people in the highest income brackets need to contribute more to the nation’s development in view of rising income levels. She has proposed that people who earn over Rs 2 crore should be required to pay higher taxes.
“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 % (percentage points) respectively,” she told the Lok Sabha in her 129-minute speech.
Sitharaman had started out indicating her direct tax proposals with a ‘thank you’ note and a parable. She gave the analogy of the elephant that would not enter the paddy field and trample the harvest if given a small amount of rice. The message to tax payers was also that they should pay their part else the government would have to move in. It would be counterproductive for the government too since “What it (elephant) eats would be far lesser than what it would trample over!”
She noted that tax collections of the government had grown 78 per cent over the last five years to Rs 11.37 lakh crore last year.
Nirmala Sitharaman did not announce any changes to the income tax slabs for the middle class, recalling that tweaks made during the interim budget and earlier had alleviated the tax burden on small and medium income-earners.
“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 said.
But she did make it simpler for people to file their tax returns, even those who do not have a permanent account number card, or PAN card. Such people can simply quote their Aadhaar number when they have to file their returns or elsewhere, the finance minister said.
Tax payers would also get pre-filled tax returns which will contain details of salary income, capital gains from securities, bank interests, and dividends etc. and tax deductions. “This will not only significantly reduce the time taken to file a tax return, but will also ensure accuracy of reporting of income and taxes,” she said.
The minister also announced that people who take a loan to buy an electric vehicle will get additional income tax deduction of Rs 1.5 lakh on the interest repaid on the loans.
Sitharaman also raised the tax deduction on interest paid on housing loans from Rs 2 lakh for properties occupied by the tax payer to Rs 3.5 lakh. The increase in deduction, however, is conditioned on the tax payer taking the loan before March next year. Also, the house should not cost more than Rs 45 lakh.
“This will translate into a benefit of around Rs 7 lakh to the middle class home-buyers over their loan period of 15 years,” she said.