Union Budget 2015: Super rich pay more & no respite for individuals in tax

 Moneycontrol bureau

Though corporate income tax rate has been reduced to 25% from 30%, individuals saw no reduction in income tax rate. The tax exemption limit too has been left unchanged. Rather super-rich individuals, individuals having an income of Rs 1 core or more per year, have to pay a surcharge of 2% on their income.

It was widely demanded that the finance minister should hike the basic income tax exemption limit in this union budget. The demand was based on the backdrop of high inflation seen in Indian economy in recent years. Finance minister too is seen as a supporter of high basic exemption limit, as he was heard talking about an exemption limit of Rs 5 lakh in April 2014 when he was campaigning for Lok Sabha elections. His logic was simple - higher tax exemption limit will lead to more money in the hands of the individuals. As individuals spend more, government revenues grow on account of increase in value added taxes and excise duties. More demand for goods also pushes economic growth. Of course individual tax payers had their own reasons behind the demand for higher tax exemption limit.

Salaried individuals do not have shelter in the form of standard deduction, which was done away since assessment year 2006-2007. The trouble for the salaried individuals further increased due to double digit inflation for prolonged period of time. This has reduced purchasing power in the hands of individual tax payers. In such a scenario higher tax exemption limit made more sense. Finance Minister Arun Jaitley took maiden step in that direction last year, when he hiked basic tax exemption limit by Rs 50000 to Rs 250,000 per year. However the hot seat of finance minister has made finance minister change his mind from a supporter to hiking tax exemption limit to an ardent defender of containing fiscal deficit.  One must remember that a hike of Rs 50000 in basic tax exemption limit costs government Rs 15,000 crore in revenues.