The richest Indians, who earn crores of income every year, are wishing they were middle class! In Union Finance Minister Nirmala Sitharaman’s first-ever budget presented today, the super-rich found the not so favorable side of Goddess Lakshmi. The new Finance Minister slapped a higher surcharge on these super rich. She, however, chose to not touch the middle-class when it comes to income tax. Read on.

Super rich tax

As per the Budget 2019 announcement, those who have taxable income between Rs 2 crore to 5 crore will pay an additional surcharge of 25%, and those who have income of Rs 5 crore and above will pay an even steeper 37%.

These are two new surcharge income brackets introduced in this year’s Budget. Earlier those who had taxable income of Rs 50 lakh to Rs 1 crore paid a surcharge of 10%, and those who had Rs 1 crore and above paid 15%. The surcharges for these income slabs slabs will remain as they are.

“We have taken several measures in the past to alleviate the tax burden on small and medium income-earners as those having an 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. However, in view of rising income levels, those in the highest income brackets, need to contribute more to the Nation’s development. 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 % respectively,” Sitharaman said in her Budget speech.

According to Dhiraj Relli, MD & CEO, HDFC Securities, the increase in surcharge on income tax for HNIs would affect ~60,000 assessees and raise Rs 15,000 crore to Rs 18,000 crore over the year going by statistics for Assessment Year 2017-18.

No changes in tax rates or slabs, while raising the surcharge on higher income group in this Budget, reflects the Government’s continued focus of taxing more to those who can afford to pay more taxes. “Surcharge is proposed to be raised from 15% to 25% for those falling in the income group of Rs 2 crore to Rs 5 crore, and to 37% for those having income exceeding Rs 5 crore,” says Kuldip Kumar, Partner & Leader, Personal Tax, PwC India.

If you have an income of above Rs 1 crore and up to Rs 2 crore, you have been spared the enhanced surcharge. You will continue to pay tax at 35.88%.

But, if you earn an annual income in the above Rs 2 crore and up to Rs 5 crore bracket, then the enhanced surcharge means you will pay 39% from 35.88% previously. This means a 3.12% hike.

Those earning Rs 5 crore and above annually, will face the largest hike. They earlier paid 35.88%, but now will pay 42.744%, a hike of 6.86%.

“This will result in an overall increase in the tax rate of 3% to 7%. While this measure shall have a limited impact as the number of taxpayers having income above Rs. 1 crore is approximately 140,000 as per the recent CBDT data but their economic influence is much greater,” says Dr. Suresh Surana, Founder, RSM India.

Amar Ambani, President & Research Head, YES Securities says that this is a body blow to HNIs by levying a high surcharge on the rich. He attributes the big surcharge tax on the high-income group as one of the reasons why stock markets fell after Budget on Friday.

Rishabh Shroff, Partner & Co-head, Private Client Practice, Cyril Amarchand Mangaldas says that while promoters and entrepreneurs can breathe easy, given that the much feared Estate Duty did not come, but this surcharge is still an issue. “Whilst this is an additional tax burden for Corporate India’s leaders, it is still far better than an aggressive Estate Duty,” he opined.

Kumar Shankar Roy

Kumar Shankar Roy is contributing editor with RupeeIQ. Kumar is a financial journalist, with a functional experience of 15 years. He tracks mutual funds, insurance, pension, PMS, fixed income/debt and alternative investments markets closely. He has worked for The Times of India, The Hindu Business Line, Deccan Chronicle Group, DNA, and Value Research, among others, across different cities in India. He is deeply interested in marrying data insights with actionable opinion. He can be contacted at [email protected].

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