Bhadkamkar A V

Bhadkamkar A V

I want The Hon. Finance Minister to consider my suggestion on the above subject.  Surcharge @10% of Income tax is levied when taxable income exceeds Rs. 50 lacs and upto 1 crore. Income tax for Rs.50 lacs works out to Rs. 1312500/-.

Similarly Surcharge @15% of Income tax is levied when taxable income exceeds Rs. 1 crore. Income tax for Rs. 1 crore works out to Rs.2812500/-.

Marginal Relief clause :

Provided that in the case of persons mentioned above having total income exceeding;

(a) Fifty lakh rupees but not exceeding one crore rupees, the total amount payable as income-tax and surcharge on such income shall not exceed, the total amount payable as income-tax on a total income of fifty lakh rupees by more than the amount of income that exceeds fifty lakh rupees;

(b) one crore rupees, the total amount payable as income-tax and surcharge on such income shall not exceed, the total amount payable as income-tax on a total income of one crore rupees by more than the amount of income that exceeds one crore rupees.

If the taxable income is Rs. 5000100/-, the income tax works out to Rs. 1312530/-.
Surcharge @10% of tax will be Rs. 131253/-
Total Tax will be Rs. 1443783/-

It means by earning Rs.100/- more he would have to pay Rs.131283/- (Rs.1447383 – 1312500) more towards income tax & surcharge. Therefore, the Marginal Relief clause is provided.  As per this clause his surcharge will be only Rs.70/- . With income tax of Rs.1312530/- his total tax will be Rs.1312530+Rs.70/- = Rs.1312600/-. He pays all his excess income of Rs.100/- above Rs.50 Lacs as income tax + surcharge.

The breakeven point for such marginal relief calculations is taxable income of Rs.5195896/-. The person who earns more upto Rs.195896/- above Rs.50 lacs have to pay full excess amount of Rs.50 lacs towards income tax + surcharge. In other words the take home pay of a person whose taxable income is Rs.50 lacs is same as that of a person whose taxable income is between Rs.5000001/- to Rs.5195896/- There is no benefit of earning more upto Rs.195896/- above Rs.50 lacs.

Over and above this, he pays education cess @ 4%. Total tax including surcharge is Rs. 1365104/-.

Similarly the person whose income exceeds Rs. 1 crore, pays surcharge @15%. In this category also above logic applies. The breakeven point for marginal relief is taxable income of Rs.10214694/- (Rs. One crore two lacs fourteen thousand six hundred ninety four only).

I agree that the Government should get more revenue from such class of people. But the persons in the above bracket suffers due to this surcharge applicable on total tax. I, therefore, suggest that the surcharge should be a certain % (say 1/3rd) of income tax above Rs.50 lacs. If taxable income is Rs.51 lacs 1/3rd surcharge will be Rs.10000/-. (Income tax on Rs.51 lacs i.e. Rs.1342500/- less income tax on Rs.50 lacs i.e. Rs.1312500/-. Surcharge 1/3rd of income tax on excess of Rs.50 lacs i.e. 1/3rd of Rs.30000/-.) So the person who earns  Rs. One lac above Rs.50 lacs will pay Rs.30000/- as income tax and Rs.10000/- as surcharge. His take home pay will still increase by Rs.60000/- out of Rs. One lac.

Similarly in case of person whose taxable income exceeds Rs. 1 crore,  surcharge @ say 40% of on income tax above Rs. 1 crore may be charged. If taxable income is Rs. 10100000/- (Rs. One crore one lac) surcharge @40% on Rs.30000/- (tax on Rs. 1 lac above Rs one Crore) i.e Rs.12000/- So the person who earns Rs. 1 Lac above Rs. 1 crore, will pay Rs.30000/- tax + Rs.12000/- as surcharge . His take home pay will be increased by RS.58000/- out of Rs. 1 lac income above Rs. 1 crore.

Alternatively, instead of surcharge, the income tax slab can be increased for taxable income exceeds Rs.50 lacs (say 35%) and for taxable income exceeds Rs. 1 Crore. (say 40%)

The experts in Finance department can decide the % of surcharge on income exceeding Rs.50 lacs / Rs. 1 crore or introduce higher income tax slab rate for income exceeding Rs. 50 lacs / Rs. 1 crore to avoid marginal relief clause but to get increased revenue for the Government.

The above changes will avoid complicated calculations as well as dissatisfaction for the persons in marginal income group.

The detailed calculations are shown in the attached excel file.

Download Excel File

I trust due consideration will be given to the point mentioned above.

(Author can be reached at M – 9967683680 Tel – D 022-62162829)

Author Bio

Qualification: Graduate
Company: Agrocel Industries Pvt Ltd.
Location: DADAR MUMBAI, Maharashtra, IN
Member Since: 18 Feb 2019 | Total Posts: 4

My Published Posts

More Under Income Tax

Leave a Comment

Your email address will not be published. Required fields are marked *