Union Budget 2019-20: Taxes

Union Budget 2019-20: Budget proposes higher income tax on rich

In a radical move, the Union Budget has proposed an increase in the effective tax rate paid by high net-worth individuals (HNIs) by hiking the surcharge paid by those earning more than ₹2 crore and ₹5 crore a year.

“In view of rising income levels, those in the highest income brackets need to contribute more to the nation’s development,” Finance Minister Nirmala Sitharaman said in her Budget speech. “I, therefore, propose to enhance surcharge on individuals having taxable income from ₹2 crore to ₹5 crore and ₹5 crore and above so that effective tax rates for these two categories will increase by around 3% and 7% respectively.”

According to the government, this increase in the surcharge is expected to earn the government an additional ₹12,000 crore a year.

Ms. Sitharaman highlighted the growth of direct tax revenue, which she said stood at 78% from ₹6.38 lakh crore in financial year 2013-14 to around ₹11.37 lakh crore in financial year 2018-19. She added that direct tax collections are now growing in double digits every year.

The government estimates that it will collect ₹5.69 lakh crore from income tax in financial year 2019-20, which is 7.5% higher than the ₹5.29 lakh crore revised estimate for collections in 2018-19.

Union Budget 2019-20: Budget proposes higher income tax on rich
 

In continuation of former finance minister Arun Jaitley’s assurance that this government would reduce corporate tax rates, Ms. Sitharaman also said that companies with a turnover of up to ₹400 crore a year would now have to pay tax at 25%. This turnover limit was earlier ₹250 crore a year. The new limit will now cover 99.3% of companies, Ms. Sitharaman said.

“We are progressively moving towards fulfilling our goal on that [reducing corporate tax rates for all companies to 25%],” Ms. Sitharaman said at a press conference. “By bringing in more number of companies in that lowered rate, we are clearly sending a message that we are not trying to stick to rigidity on the rates.”

According to Revenue Secretary Ajay Bhushan Pandey, the revenue loss on account of this would be around ₹4,000 crore a year.

Ms Sitharaman also announced a number of measures, such as electronic face-less assessments, to improve transparency in income tax assessment process and also to ease the return filing process for tax filers.

“The existing system of scrutiny assessments in the income-tax department involves a high level of personal interaction between the taxpayer and the department, which leads to certain undesirable practices on the part of tax officials,” Ms. Sitharaman said. “To eliminate such instances, and to give shape to the vision of the Hon’ble Prime Minister, a scheme of faceless assessment in electronic mode involving no human interface is being launched this year in a phased manner.”

To start with, such e-assessments are to be carried out in cases requiring verification of certain specified transactions or discrepancies, she added.

Under the new system, cases selected for scrutiny will be allocated to assessment units in a random manner and notices will be issued electronically by a Central Cell, without disclosing the name, designation or location of the Assessing Officer. This Central Cell will be the single point of contact between the taxpayer and the Income Tax Department.

In a bid to ease the return filing process, Ms Sitharaman said that taxpayers will be able to access pre-filled tax returns which will contain details of salary income, capital gains from securities, bank interest, and dividends etc. and tax deductions.

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Printable version | Jan 22, 2021 3:49:52 AM | https://www.thehindu.com/business/budget/nion-budget-2019-20-budget-proposes-higher-income-tax-on-rich/article28297388.ece

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