Favours surcharge on income above a level
Pitching for higher rates of taxes on the super rich, Prime Minister’s economic advisor C. Rangarajan, on Saturday, said the forthcoming budget could look at imposing surcharge on income above a threshold.
“... One need not disturb the structure of income tax system as it is now. But add a surcharge for income above a particular level. I believe as we go along, we need to raise more revenues and the people with larger incomes must be willing to contribute more,” he told reporters on the sidelines of a Financial Inclusion Day event.
His suggestion comes ahead of the Budget for 2013-14 for which Finance Minister P. Chidambaram has started consultations with different interest groups.
The government taxes income at three rates — 10 per cent, 20 per cent and 30 per cent. These rates were fixed in 1997 by then Finance Minister Mr. Chidambaram. Interestingly, recently at a lecture to honour Raja Chelliah, Mr. Chidambaram had called for a debate on the need of inheritance tax in India, wondering if the country had paid enough attention to accumulation of wealth in the hands of a few.
Dr. Rangarajan also stressed on fiscal discipline to promote growth.
“We need to bring down the fiscal deficit over the next few years. For this purpose, we need to act on expenditure and revenue sides. On the expenditure side, we must focus on how to prune the subsidies and reduce them as a proportion of GDP,” Dr. Rangarajan said.
Dr. Rangarajan said, “We also need to focus on the revenue side and the tax-GDP ratio for central government.” On inflation, Dr. Rangarajan expressed hope that WPI would come down to 7 per cent by March this year.
Inflation had declined marginally to 7.24 per cent in November last year from 9.46 per cent in same month of previous year.
Asked if the RBI would cut interest rate in its upcoming review of the monetary policy, he said it would depend on the inflation reported for December, which is expected to be released later this month.