NEW DELHI: Finance Minister Nirmala Sitharaman decided to play Robin Hood on India’s few declared high net worth tax-payers by taxing them heavily to rake in about Rs 12,000 crore more for her gigantic Rs 27.86 lakh crore budget.
Sitharaman enhanced the surcharge on those earning an income of more than Rs 2 crore and up to Rs 5 crore to 25 per cent, so that the effective tax rate on them went up by 3 per cent. While the surcharge on those earning over Rs 5 crore was raised by 37 per cent, increasing the effective tax on them by 7 per cent.
“Budget has imposed heavy income tax liability on high net worth individuals having an income of over Rs 2 crores. For an HNI who has income above Rs 5 Crores, an effective rate of taxation would now be increased in tax liability would be 42.74 per cent, while for those earning between Rs 2 crore and Rs 5 crore would be 39 per cent,” said Swapan Sarkar, President of the Indo-American chamber of commerce.
India has a very narrow base of 4.6 crore tax-payers and just 14,011 people out of that are in the real Super-rich category of people who declare an income of Rs 5 crore and above per annum tax. However, these Super-rich account for 34.25 per cent of the total taxes collected according to data with the Central Board of direct taxes, which is what prompted the idea of the `Robin Hood tax’ being adopted by India. However, officials admit that tax administrators would have done better to “try and widen the base rather than impose pain on those who honestly declare their income.”
The government already levies cesses and surcharges on account of health and education, totalling about 4 per cent on all tax-payers. The Direct Tax Code which the government intends to bring in at some stage, talks of doing away with surcharges and capping income tax at 30 per cent, however, this is yet a work in progress.
Earlier, some six years ago, C. Rangarajan, the then chairman of the prime minister’s economic advisory council, had argued in favour of taxing the rich at a higher rate, which prompted the Government to come up with `Rich’ tax surcharge on those earning more than Rs 50 lakh a year.
However, in the country with the most millionaire’s – the US - the idea of a tax on the super-rich has become a movement, which seems to have impressed Indian leaders. More than a dozen prominent US billionaires including financier George Soros and Facebook co-founder Chris Hughes, have written to US Presidential candidates for 2020 seking a new government tax on extreme wealth to help combat income inequality, provide funding for climate change and public healthcare.