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BW Businessworld

What Does The 10% Surcharge For Super Rich Mean?

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The “super-rich” of India would be cursing this day as for the first time in many years they have been subjected to an additional levy on their enviably high annual income.

The UPA government, in its fourth Union Budget, has imposed a tax-on-tax (or surcharge) on individuals whose yearly income exceeds Rs 1 crore. Going by Finance Minister’s account, there are only 42,800 individuals in India whose taxable annual income exceeds Rs 1 crore.

Finance Minister P. Chidambaram, much to the amusement of the House, said, “When I need to raise resources, who can I go to except those who are relatively well placed in society?  There are 42,800 persons – let me repeat, only 42,800 persons – who admitted to a taxable income exceeding Rs 1 crore per year.  I propose to impose a surcharge of 10 per cent on persons whose taxable income exceeds Rs 1 crore per year.”

So how much does a 10 per cent surcharge translate to in real terms?

Say, the CEO of a company earns an annual income of Rs 10 crore; Till now, the CEO was only paying an income tax of 30 per cent on his annual income – which would amount to a tax outgo of Rs 3 crore every year. With the new 10 per cent surcharge, the CEO will now have to pay about 33 per cent as tax, which will take his net tax flow to Rs 3.3 crore.

“But that’s fair… The country is phasing through tough times. Such situations call for the super-rich to part with some their income. It may not have any irreparable damage to their overall finances,” said Nirmal Jain, chairman of broking and financial services outfit, India Infoline (IIFL).