India to Increase Tax for Top Earners to Boost RevenuesBhuma Shrivastava
Mukesh Ambani, India’s richest man, will be among the 42,800 top earners being asked to pay higher income tax by Finance Minister P. Chidambaram as he seeks to rein in the budget deficit.
People earning more than 10 million rupees ($185,000) a year will have to pay an extra 10 percent surcharge for one year, Chidambaram said in his speech in Parliament today. The move will affect 42,800 people, he said.
Chidambaram is cutting subsidies and raising taxes on luxury goods to pare the widest fiscal deficit in major emerging nations. He also increased customs duties on yachts, high-end motorcycles and cars. The nation is targeting a budget shortfall of 4.8 percent of gross domestic product in the 12 months starting April 1 from an estimated 5.2 percent gap in the year ending March 31.
The finance minister is sending out a message that the rich also need to bear the “weight of current challenges,” said Rana Kapoor, founder and managing director of Yes Bank Ltd., who was paid more than 14 million rupees as salary in year ending March 31, according to exchange filings. The money collected through the surcharge will be “negligible,” he said.
The effective rise in the tax rate for higher earners will be from 30 percent to 33 percent and will only impact taxable income, said Rahul Garg, executive director, PricewaterhouseCoopers LLP.
“When I need to raise resources, who can I go to except those who are relatively well placed in society?,” Chidambaram said in his speech. “I am confident that when I ask the relatively prosperous to bear a small burden for one year, just one year, they will do so cheerfully.”
Ambani, 55, chairman of Reliance Industries Ltd., earned a salary of 41.6 million rupees in the year ended March, according to the company’s annual report. Y.C. Deveshwar, chairman of ITC Ltd., Asia’s second-largest cigarette maker, was paid 31.2 million rupees in the 12 months to March 2011.