NEW DELHI: As the government is mulling proposals to cut personal income tax, the Department of Revenue has suggested that instead of cutting tax rate across the board, it should increase tax for the super-rich, to compensate for the revenue loss.
“Income tax exemption is on cards. But in order to compensate for the revenue loss, the revenue department has recommended that tax on super-rich should be increased. That will make up for the revenue loss and will not hurt a large chunk of salaried class,” an official told this publication.
The reason behind the move is that India still has low tax bracket for the super-rich, the official claimed. In the US, there are seven income tax brackets, with a peak rate of close to 50 per cent.
“The view of the revenue department is that the exemption should not be across the board. For instance, those with annual income above Rs 20 lakh should not get further tax exemption,” the official added.
According to sources, the Central Board of Direct Taxes’ internal committee has proposed tax rate to be 10 per cent for income between Rs 10 lakh and Rs 20 lakh per annum, 30 per cent for income bracket between Rs 20 lakh and Rs 1 crore, 35 per cent for income upto Rs 2 crore and higher for those having income beyond Rs 10 crore.
However, the official has maintained that these are mere recommendation and is subject to approval from the top office. Earlier, Finance Minister Nirmala Sitharaman had indicated that the government is considering reducing the personal income tax in the upcoming budget to revive the ailing economy and to put more money in the hands of consumers.
“Tax rate cut is one among the many things we are thinking to boost growth,” Sitharaman had said in an event. When asked about the timeline for the relief on personal income tax, the minister said: “wait for the Budget”.
Moreover, in the pre-budget consultations, economists and India Inc had suggested the government to give more fiscal stimulus so that there is more money in the hand of consumers, which will improve consumption and had requested to put aside the fiscal concerns.