In order to widen the tax net and help government to raise tax collection significantly, India’s finance minister Arun Jaitley while presenting budget 2015 in parliament has announced to abolish the wealth tax and levied additional surcharge at the rate of 2% on super rich persons with taxable income of Rs 1 crore or above in a financial year.
Due to this the earlier surcharge that is charged at the rate of 10% on individual with taxable income of Rs 1 crore or above has now been increased to 12%. With this increase, now the peak tax rate for a super rich person in India is raised from 33.99% to 34.61%.
Surcharge at the rate of 10% was introduced in 2013 by the finance minister P Chidambaram for individuals with annual income of Rs 1 Crore or above.
Wealth tax in India was introduced in the year 1957. Wealth tax as on today charged 1% on assets excluding equity, bonds and first house of Rs 30 lakh and above. In the financial year 2013-2014, government has collected only Rs 1008 crore from wealth tax. This new measure will lead to tax collection of Rs 9000 crore.
The main reason of abolishing wealth tax is that the cost of collection was high while the yield was low.
With this new measure government has also takes away the hassle of filling wealth tax and simplifies the procedure of filing return.
Companies in India with income between Rs 1 crore and Rs 10 crore are now required to pay a surcharge of 7%. Companies in India with income more than 10 crore are now required to pay surcharge of 12% compare to earlier rate of 10%.
To track the wealth held by individuals and entities, information on assets will now be captured in income tax returns. While filing income tax return for the financial year 2015-2016, you will have additional places to declare assets held in India and outside India.
Please remember that surcharge that is increased by 2% is applicable to individuals, HUF, AOP, BOI, Partnership firm, Cooperative society, local authority and Company if total income exceeds Rs 1 crore.