REUTERS - Finance Minister P. Chidambaram gave a notional tax break to millions of taxpayers on Thursday with a proposed tax credit of 2,000 rupees in the annual budget to people with income up to 500,000 rupees, but introduced a surcharge on the rich.
The Harvard-educated politician said there was little room to give away tax revenues or the tax base in a budget aimed at reviving growth in India.
“1.8 crore (18 million) tax payers are expected to benefit to the value of 3,600 crore (36 billion) rupees,” Chidambaram said in his speech in parliament.
“Assuming an inflation rate of 10 percent and a notional rise in the threshold exemption from 200,000 rupees to 220,000 rupees, I propose to provide a tax credit of 2,000 rupees to every person who has a total income up to 5 lakh rupees,” he said.
The finance minister also introduced new taxes on the rich with a surcharge of 10 percent for one year on those with taxable incomes of more than 1 crore (10 million) rupees.
Chidambaram said 42,800 persons in the country had admitted to taxable incomes exceeding 10 million rupees per year.
But there was little relief for the man on the street and Chidambaram said there was no case to revise either the income tax brackets or the rates since the current slabs were introduced last year.
“Even a moderate increase in the level of threshold exemption will mean that hundreds of thousands of tax payers will go out of the tax net and the tax base will be severely eroded.”
The finance minister also said that people buying houses would get an additional deduction of 100,000 rupees on interest payments on their first home loan of up to 2.5 million rupees.
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Reporting by India Online