Savvy analysts who have traditionally predicted the rise of the so-called “right-wing” economy in India with the arrival of the BJP are somewhat baffled. Instead of everything they had postulated and envisioned, a new form of welfare economics emerged, as demonstrated by the recent Union budget. For starters, the government has raised the highest tax bracket for the super-rich, increasing a surcharge of 3% for people earning Rs 2-5 crore and 7% for those earning more than 5 crore. of Rs. This surcharge will help the government to earn an additional Rs 13,000 crore.
The highest tax bracket would mean new effective rates of 39% for income of Rs 2 to 5 crore and of 42.74% for income above Rs 5 crore. This is no small surprise. in a country where taxpayers have traditionally made up the confined middle class, whose withholding tax deduction (TDS) leaves them no choice but to spit.
Fortunately, this scenario seems to be changing. The other government initiative is to monitor the increase in questionable cash transactions. Banks have been advised to keep track of cash transactions above Rs 1 crore per year. In the budget, Finance Minister Nirmala Sitharaman announced 2% TDS on cash withdrawals over Rs 1 crore per year, by bank account.
A senior official quoted by this article said that the number of those who make cash withdrawals over 1 crore rupees per year has reached a few lakh crore. In many cases, it has been found that their permanent account number or PAN is misquoted or not cited at all. As a result, the government believes the measure would help bring more of the wealthy below the top tax bracket.
Data from the Income Tax Department puts the number of individual taxpayers declaring income above 1 crore rupee at 81,344 in 2017-18. Even during Narendra Modi’s first term, the government has consistently insisted on using the PAN-Aadhaar link, to identify a better audit trail and to make all transactions responsible and legitimate to the extent possible. That this budget bears the stamp of the welfare economy everywhere is evident in its speech against the rich, while seeking the support of the business community in building a just and equitable society. No doubt the rich would complain, but there is consistency in the political message here.
The finance minister, in the aftermath of the budget, justified increasing the highest tax rates for the rich by saying that income disparities are increasing and that the rich need to help the government provide for them. needs of the poorest segments of society.
According to her, the poor simply cannot be allowed to remain without basic amenities. “We respect them (the rich) for the job-creating role they play … But with increasing income disparities, shouldn’t we all be participating?” Was his refrain. The government cited the example of several developed countries where those with higher incomes pay more taxes. Even so late, it is an idea whose time has come in India.