Bangalore: Giving small relief to tax payers, finance minister P Chidambaram on Thursday announced a tax credit of Rs 2,000 for persons with income up to Rs 5 lakh.

The proposal, he said, will benefit 1.8 crore tax payers entailing a revenue sacrifice of Rs 3,600 crore.

The other slabs and rates have been kept unchanged in view of constrained economy, he said.

"In a constrained economy, there is little room to raise tax rates or large amounts of additional tax revenues. Equally there is little room to give away tax revenues or the tax base. It is time for prudence, restraint and patience," Chidambaram said.

However, he said: "I am inclined to give some relief to tax payers in the first bracket between Rs 2-5 lakh.... I propose to provide tax credit of Rs 2,000 to every person who has a total income of up to Rs 5 lakh. 1.8 crore taxpayers are expected to benefit, to the value Rs 3,600 crore".

As per the existing slabs, tax on income from 2 lakh to 5 lakh is at 10%, up to Rs 10 lakh at 20% and above 10 lakh at 30%.

KPMG (India) Tax Partner Parizad Sirwalla said: "The overall slabs and tax rates remain same in view of the objective of widening tax base and increasing tax compliance".

Chidambaram proposes 10% surcharge on super-rich

In the Budget proposals for the next fiscal, Chidambaram proposed a surcharge of 10% on persons with income of over Rs one crore. The proposal will cover 42,800 individuals and tax entities.

"When I need to raise resources, who can I go to except those who are well placed in society. Only 42,800 persons in the whole country who admitted to a taxable income of exceeding Rs one crore per year.

"I propose to impose a surcharge of 10% on persons whose taxable income exceeds Rs 1 crore per year," he said while unveiling Budget proposals for 2013-14.

The proposal to tax the super-rich was mooted by Prime Minister's Economic Advisory Council Chairman C Rangarajan and found echo in Wipro chairman Azim Premji.

"I believe there is a little bit of spirit of Azim Premji in every affluent taxpayers and I am confident when I ask relatively affluent taxpayers to bear a small burden for one year they will do so cheerfully," he said, adding the tax proposal will be only for one year.

He further said, "fiscal consolidation cannot be effected only by cutting expenditure. Where ever possible, revenues must also be augmented."

The surcharge will apply to individuals, HUFs, firms and entities with similar tax status, he added.

Read: Union Budget 2013: SUVs, Smartphones, Cigarettes To Cost More/ 532 Cr to IT Modernisation of Post Offices/ Clarity on Taxes on IT R&D Centres Soon