How will income tax provisions announced by Nirmala Sitharaman affect you?

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Union Finance Minister Nirmala Sitharaman on Friday made a slew of announcements on income tax provisions, leaving the country’s middle-class population largely disappointed.  She kept the income tax slab rates unchanged but announced a few more provisions that are likely to adversely impact a large group of the country’s population.

Nirmala Sitharaman

While the tax-free annual earnings continue to remain at Rs 2.5 lakh, the government has now increased the income tax surcharge for the country’s super-rich earning more than Rs 2 crore a year. Those earning between Rs 2-Rs 5 crore will be expected to pay an additional 3% tax with surcharge rate being increased from 15% to 25%. Those earning in excess of Rs 5 crore annually will now pay a surcharge of 37%, from the current 15%.

Reacting to Friday’s announcements, Poorva Prakash, Senior Director, Deloitte India, told Indian Express, “This will impact high-income taxpayers as the surcharge so levied will increase the current tax rates for such individuals from 35.88% to 39% and 42.74% respectively. This means an additional tax burden for such categories of income tax payers by 3.12% and 6.86% respectively.”

Industrialist Anand Mahindra said that the increased income tax provisions had ‘spooked’ the market. He wrote on Twitter, “Increased income taxes spooked the markets.But I think the introduction of estate duty would’ve been more unnerving. Finally, the elephant analogy was most apt. If it no longer tramples on our mounds of rice, private confidence, investment AND the markets will all rebound.”

In other announcements, Sitharaman said that people engaged in certain high-value transactions will be required to file their tax returns even if their taxable limit is less than Rs 2.5 lakh. These transactions include depositing an amount in the excess of Rs 1 crore, if the individual in question has incurred an expenditure of more than Rs 2 lakh for herself/himself or any other person for travel to a foreign country. This will also be applicable to individuals if they incurred an expenditure of an amount or aggregate of the amounts exceeding Rs 1 lakh towards the consumption of electricity.

Sitharaman also announced that people who did not have PAN cards could use Aadhaar number in place of PAN, wherever there is a need for PAN. In another change, the finance minister also said that to make the filing of Income Tax Returns easy, pre-filled ITRs would be made available by integrating information already collected from banks, stock exchanges, mutual funds etc.

The share market reacted with disappointment as the Sensex dropped 395 points at the close of trading on Friday.

 

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