New Delhi: Ruling out any immediate review of enhanced surcharge on the super-rich, Finance Minister Nirmala Sitharaman on Friday said the matter will be looked into only in 2022 when the country will celebrate the 75th anniversary of independence. Ironically, however, Prime Minister Narendra Modi wants India to turn into a $ 5 trillion economy not as gradually as his finance minister wants to review the super-rich tax but as soon as possible.
चुनौतियों से हम घबराते नहीं। न ही कहते हैं कि यह सपना बेमानी है। आपने आलोचना को spin करने की कोशिश की। हमने आपके सपने पर नहीं, आपके तरीक़ों पर सवाल उठाया है। जब भी कोई ग़रीब अपनी हालत सुधारेगा, आप उसपर टैक्स लादकर फिर से उसे ग़रीब बना देंगे। इस तरह $5 ट्रिलियन तक कैसे पहुंचेंगे? https://t.co/SaVvq7zATI
— Surajit Dasgupta (@surajitdasgupta) July 7, 2019
In the 2019-20 Budget, the government increased surcharge from 15% to 25% on the rich, defined as citizens with taxable income between Rs 2 crore and Rs 5 crore. A surcharge of 15% to 37% is levied on the super-rich with income above Rs 5 crore.
Following the increase in surcharge, the effective income tax rate for individuals with a taxable income of Rs 2-5 crore has gone up to 39% from 35.88% and for those above Rs 5 crore to 42.7%.
“I would like to clearly say that marking the 75th anniversary of India’s independence and immediately on reaching that stage we want to review the surcharge on the HNIs (High Net-worth Individuals),” she said when asked if the government is considering to remove enhanced surcharge on super-rich as well.
The government on Friday decided to withdraw the enhanced surcharge on the long-term and short-term capital gains arising from share sale and futures and option in order to encourage investment in the capital market.
The withdrawal would lead to a revenue loss of Rs 1,400 crore to the exchequer, Revenue Secretary Ajay Bhushan Pandey told reporters. “As regard to specific reference to a high net worth individual, the moment we finish the 75th anniversary of India’s independence, we shall review and take a call,” she added.
Commenting on the decision, EY India Tax Partner Sameer Gupta said that while this is a much-anticipated announcement, the scope of the full coverage is to be seen. It is not clear what is the implication for instance on other items of capital gains like gains on debt securities and derivatives, he added. Hopefully, the surcharge on gains on these instruments and items of income should also get addressed, he noted.