With the announcement of the Union Budget 2019, it evident that the big corporates will not fall within the lower tax ambit and a corporate rate cut will not be extended to them as well. The latest budget proves to be a major hit on the super-rich taxpayers.
Taxpayers earning between Rs 2 crore to Rs 5 crore will be liable to pay a surcharge of 25%; individuals earning more than Rs 5 crore will be liable to pay a surcharge of 37%. This translates to the effective tax rate being 39% and 42.744% respectively. The budget 2019 proposes to raise the effective tax rates of these two categories by around 3% and 7% respectively.
The Finance Minister, Nirmala Sitharaman, stated that the objective of increasing the surcharge is revenue mobilisation. FM also said that taxpayers falling under the highest income brackets have to make more contributions towards the development of the nation.
FM also added that the direct tax revenue has increased by more than 78% in the last 5 years to Rs 11.37 lakh crore. With the surcharge increase, the government is expecting to earn an additional Rs 12,000 crore per year.
Financial experts are of the opinion that this budget clearly shows that the government continues to focus on taxing individuals who have the capacity to pay more taxes, and that’s the reason there is an increase in the surcharge for high-income earners. Also, they believe that this initiative proves to be an easier way to bring in additional revenue versus introducing inheritance tax.