India Levies Surcharge on Super Rich

New Delhi: Resisting the temptation of election-year populism, the general Budget offered no major tax sops but slapped a surcharge on the super-rich, raised duties on mobile phones, cigarettes and imported luxury vehicles and imposed a levy on property sale above 50 lakh.

Presenting UPA-II's last full-fledged Budget ahead of net year's general elections to net in an additional 18,000 crore, finance minister P Chidambaram did a tightrope walk balancing growth needs with fiscal prudence by stepping up expenditure in social sectors and cutting subsidies.

In a Budget that pegs fiscal deficit at 4.8 per cent of GDP, defence allocation has been stepped up by 14 per cent over the revised expenditure in the current year to 2,03,672 crore in the next.

Without changing the basic slabs and rates in income tax rates, Chidambaram gave a benefit of 2,000 to individual tax payers with taxable income of up to 5 lakh, that will benefit 1.8 crore tax payers entailing a revenue sacrifice of 3,600 crore.

First-time home buyers will get an additional deduction of interest of 1 lakh for home loans above 25 lakh and 1.50 lakh for home loans up to 25 lakh. This will be over and above the current 1 lakh deduction allowed for self-occupation.

The much-talked about 'super-rich' tax was levied as a 10 per cent surcharge on "relatively prosperous" persons with an income over 1 crore.

Similarly, on domestic corporates with taxable income of 10 crore, the surcharge has been raised from 5 to 10 per cent. Foreign companies will pay an increased surcharge of 5 per cent, up from 2.

The finance minister proposed that the surcharges will be in existence for just a year, while continuing the 3 per cent education cess on all tax payers.

In a bid to eliminate tax evasion through under-valuation and under-reporting in property sale, the Budget proposes a TDS of one per cent on all transfers of immovable properties for a consideration above 50 lakh. Agriculture land will however be exempted from this. While Securities Transaction Tax (STT) has been marginally reduced, the minister introduced a new Commodities Transaction Tax (CTT) on non-agricultural commodities futures.

In indirect taxes, the Budget does not make any change in the peak Customs and Excise Duties or Service Tax, but it sharply raised import duty on high-end luxury cars, motorcycles and yachts from 75 per cent to 100 per cent and excise duty on SUVs from 27 to 30 per cent.

The finance minister, like most of his predecessors, did not fail to touch smokers in raising resources. Cigarettes, cigars, cigarillos and cheroots will attract an additional 18 per cent excise duty. Dining at air-conditioned restaurants will cost more as service tax has been extended such establishments which were earlier exempted if they did not serve liquor. Mobile costing above 2,000 will attract a 6 per cent excise duty instead of 1 per cent currently.

Under the fresh excise duty proposals, marbles and silver manufactured from smelting zinc or lead while readymade garments, carpets and floor covering of coir and jute will become cheaper. Vocational courses in state-aided institutions and agriculture testing facilities have been exempted from service tax.

In a one-time amnesty scheme, 10 lakh service tax defaulters have been offered a voluntary compliance encouragement scheme under which penalty and interest will be waived for returning to the tax fold.

Aiming at higher growth rate for inclusive and sustainable development and revive manufacturing, Chidambaram hiked outlays for health, water and sanitation, SCs/STs and tribals and rural development.

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