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Union Budget 2016: Rich to pay more taxes

Published : Mar 1, 2016, 1:26 am IST
Updated : Mar 1, 2016, 1:26 am IST

The government on Monday proposed higher taxes on the super-rich in the country in the Union Budget.

Mohun Bagan face Sporting Clube de Goa in their I-League Round 10 match in Margao on Tuesday. (Photo: Asian Age)
 Mohun Bagan face Sporting Clube de Goa in their I-League Round 10 match in Margao on Tuesday. (Photo: Asian Age)

The government on Monday proposed higher taxes on the super-rich in the country in the Union Budget. They increased the surcharge on the super-rich having an annual income of over Rs 1 crore by three per cent to 15 per cent.

The finance minister Arun Jaitley proposed higher Dividend Distribution Tax (DDT) tax on those receiving dividend in excess of Rs 10 lakh per annum.

He also raised surcharge from 12 per cent to 15 per cent on persons having income above Rs 1 crore. “Dividend Distribution Tax (DDT) uniformly applies to all investors irrespective of their income slabs. This is perceived to distort the fairness and progressive nature of taxes.

Persons with relatively higher income can bear a higher tax cost. I, therefore, propose that in addition to DDT paid by the companies, tax at the rate of 10 per cent of gross amount of dividend will be payable by the recipients, that is, individuals, HUFs and firms receiving dividend in excess of Rs 10 lakh per annum,” said Mr Jaitley while unveiling Union Budget for 2016-17 on Monday.

Rate of Securities Transaction tax in case of ‘Options’ was proposed to be increased from .017 per cent to .05 per cent. Stock brokers have expressed disappointment over the increase in Securities Transaction Tax (STT) in Budget, saying the move could adversely impact equity volumes. “The STT increase in options is a substantial one. It will significantly impact the traders and limit the leeway to trade in options. Since it contributes significantly to the equity trading volume it will weigh in on the margins,” said IIFL president for retail broking Prasanth Prabhakaran

A surcharge of 10 per cent on taxable income of Rs 1 crore and above was imposed in 2013-14 by the then finance minister P Chidambaram.

In the last Budget, Mr Jaitley had abolished the wealth tax and replaced it with an additional surcharge of two per cent on the super-rich with a taxable income of over Rs 1 crore.

He also proposed to collect tax at source at the rate of one per cent on purchase of luxury cars exceeding value of Rs 10 lakh and purchase of goods and services in cash exceeding `two lakh.

“For compliant tax payers with resources, this levy not only advances collection of tax when the expenditure is incurred, but it provides data to the tax authorities to identify the persons who incur such expenditure, but may be missing from the tax base,” said Mr Jaitley. Farmers and notified class of persons will have an option of giving a form by which TCS will not be charged.

Big tax breaks for start-ups The government on Monday announced several initiatives in the Budget for start-ups, including 100 per cent tax exemption for three years and allocation of Rs 500 crore for SC/ST and women entrepreneurs, aimed at facilitating growth for these new businesses.

“It is proposed to provide a deduction of 100 per cent of the profits and gains derived by an eligible start-up from a business involving innovation development, deployment or commercialisation of new products, processes or services driven by technology or intellectual property,” finance minister Arun Jaitley said while announcing Union Budget 2016-17 in Parliament. This benefit will be available to an eligible start-up which is set-up before April 1, 2019, he added.

Similarly to promote innovation, a special patent regime has been proposed with a 10 per cent rate of tax on income from worldwide exploitation of patents developed and registered in India.

Under the Start-Up India Action Plan, the proposal is also to establish a “Fund of Funds” which intends to raise Rs 2,500 crore annually for four years to finance the start-ups. Besides, the Budget allocates Rs 500 crore for Scheduled Caste, Scheduled Tribes and women entrepreneurs in the Budget under the Stand-Up India scheme.

Subho Ray, president of Internet and Mobile Association of India, said the move will help start-ups with better incubation, talent and capital.

Anurav Rane, CEO and founder of PlanMyMedicalTrip.Com, added that while efforts by the government are really appreciated, it is disheartening to see “categorisation of start-ups basis caste”.

Another positive step seen is the proposed lowering of corporate income tax rate for the next financial year of companies with turnover not exceeding Rs 5 crore to 29 per cent plus surcharge and cess.

Location: India, Delhi, New Delhi