Tax On Super-Rich Decoded: Here’s Your Complete Guide To Understanding New Rules

Here are some important points to understand the new income tax changes for the super rich in a better way:

#Q.1) What will be the new effective tax rate as per Budget 2019 announcements?

In the Union Budget 2019, the government proposed to increase the rate of surcharge on individual taxpayers who fall in the higher income brackets.

As per the announcements, the rate of surcharge will be increased from 15 per cent to 25 per cent if the total income of an individual exceeds Rs. 2 crore but doesn’t exceed Rs. 5 crores.

For those earning above Rs. 5 crores, the rate of surcharge will be increased to 37 per cent, from the existing 15 per cent.

However, the government left the rates of surcharge applicable to those with a taxable income less than Rs. 2 crore unchanged.

Taxable income Present surcharge Proposed surcharge
Rs. 50 lakh to Rs. 1 crore 10% 10%
Rs. 1 crore to Rs. 2 crore 15% 15%
Rs. 2 crore to Rs. 5 crore 15% 25%
Rs. 5 crore and above 15% 37%

With the revision in surcharge, the highest tax rate for individuals in income bracket of Rs. 2 crore to 5 crore will increase from 35.88 per cent to 39 per cent.
For individuals having income above Rs. 5 crore, the tax rate will increase to 42.74 per cent, from existing 35.88 per cent.

#Q.2) How effective will it be?

Some tax experts say the measures announced in Budget may not boost the government’s tax collections significantly.

The hike announced in surcharge will increase taxes for the high net worth taxpayers without adding significantly to tax collections.

#3) Income tax slabs, rates unchanged

Meanwhile, the government made no changes in the income tax structure. Here are the latest income tax slabs in case of an individual whose age is below 60 years:

Net income range Actual tax rate
Up to Rs. 2,50,000 Nil
Rs. 2,50,001 to Rs. 5,00,000 5.20%
Rs. 5,00,001 to Rs. 10,00,000 20.80%
Rs. 10,00,001 to Rs. 50,00,000 31.20%
Rs. 50,00,001 to Rs. 1,00,00,000 34.32%
Rs. 1,00,00,001 to Rs. 2,00,00,000 35.88%
Rs. 2,00,00,001 to Rs. 5,00,00,000 39%
Above Rs. 5,00,00,000 42.74%

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