Budget 2019-20 ; Super Rich will have to pay up to 42.7% tax; Rs. 2-5 cr, Rs.5 cr+ brackets affected..!

Budget 2019-20 : Super Rich will have to pay up to 42.7% tax; Rs. 2-5 cr, Rs.5 cr+ brackets affected

Team ET

Finance Minister Ms. Nirmala Sitharaman increased the 15% personal tax surcharge on top-end income brackets for incomes between Rs.2 crore and Rs. 5 crore, the new surcharge is 25%, and for incomes above Rs. 5 crore, the new surcharge is 37%.

This will push up the maximum marginal rate to 39% for those earning between Rs. 2 crore and Rs. 5 crore, and for those with annual income over Rs. 5 crore, the new maximum marginal rate is 42.74%.

Maximum marginal rate is the highest rate of tax at any income level. This means for those with incomes between Rs. 2 crore and Rs. 5 crore, 39% will be the highest applicable tax rate, and for those with incomes above Rs. 5 crore, it will be 42.74%  the highest tax rate since 1992.

The extra tax outgo in absolute terms isn’t small. Someone earning Rs. 3 crore a year (or / Rs. 25 lakh per month) will pay roughly Rs. 76,375 more in tax per month. A taxpayer with an income of Rs. 6 crore a year (or Rs. 50 lakh a month) will have to shell out Rs. 3.4 lakh extra every month.

Those affected, however, make for a small percentage of 130 cr Indians. As per income tax data, of 4.66 cr returns filed in 2016-17, only 74,983 individuals (or 0.16%) reported gross incomes between Rs. 1 crore and Rs. 5 crore. A good number of these will be taxpayers earning below Rs. 2 crore. So they aren’t affected by the budget’s new rates.

Comparable to Other Nations

Only 6,361 individuals declared incomes of over Rs 5 crore.

But over the years, finance ministers have been levying extra tax on this small group.

After the 10% surcharge on incomes above Rs. 1 crore imposed by Mr. Chidambaram in 2013, the BJP government increased the surcharge twice  in 2015, the surcharge for income above Rs.1 crore was hiked to 12%, and in 2016, it was raised to 15%.  In 2017, incomes above Rs. 50 lakh were slapped with a surcharge of 10%.

Super Rich Personal Income Tax 2019-20

Country Name	Taxable Income	Income Tax
India	Above Rs. 5 Crore	42.74%
Germany	Rs 2.04 crore	45%
Japan	Rs 2.53 crore	45%
China	Rs. 5 crore	45%
US	Rs. 3.42 crore	37%

Though the maximum marginal rate of 42.74% tax appears high, it is comparable to the highest tax rates in some other countries.

In Germany, the UK, Japan and China, 45% tax rate applies to incomes much below Rs. 5 crore annually (taking the current rupee-dollar exchange rate).

For example, 45% rate applies to income of Rs 2.04 crore in Germany and Rs 2.53 crore in Japan.

In the US, for single tax filers, the top tax rate is 37% for income over Rs 3.42 crore.

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