NEW DELHI: Amid unease over an increase in the tax liability on high net worth individuals announced in the Budget, the government said on Saturday that the overall liability on those earning over Rs 2 crore a year will be lower than in several countries across the world.
Officials dished out data to show countries such as Canada, US and France had higher tax rates for the “super-rich”, even as sceptics argued that these countries also offer quality education, healthcare and social security benefits not available in India. Officials, however, maintained that those in this bracket do not depend on public health and education.
According to data provided by officials, some countries like China, South Africa and UK have comparable rates of income tax on HNIs (see graphic).
On Friday, finance minister Nirmala Sitharaman proposed to increase the surcharge on those earning over Rs 2 crore and effectively created two new tax slabs. Now, those earning Rs 2 crore-5 crore will pay 39% income tax, while individuals with an annual taxable income of over Rs 5 crore need to shell out 42.7%.
“There is a question of inequity between those earning Rs 20 or 30 lakh and those earning in crores. We found the extent of taxation was much higher in other countries and the super-rich who earned $1 million-2 million or more paid higher than an Indian earning Rs 14 crore ($2 million), who pays 35.9%,” an official said.
Government sources dismissed demands for a review of the tax proposal in Sitharaman’s maiden Budget. “The super-rich are trying to take shelter behind the middle class since it’s a vocal class. Those who are earning far more need to perform their duty towards the nation,” the official said, adding that comparisons with places like Singapore or Dubai were unfair.