How Budget 2016 is making the rich poor

The FM appears to have taken the Economic Survey’s suggestion of taxing the rich seriously and imposed several new taxes that would affect them. These include: Surcharge on resident individual’s income above Rs 1 crore has been increased from 12% to 15%; individuals with dividend income of over Rs 10 lakh will have to pay 10% on the gross dividend received; a TDS of 1% on purchase of luxury cars of over Rs 10 lakh and purchase of goods and services in cash of over Rs 2 lakh.

As per budget provisions, in addition to Dividend distribution Tax ( DDT) paid by the companies, tax at the rate of 10% of gross amount of dividend will be payable by the recipients, that is, individuals, HUFs and firms receiving dividend in excess of Rs 10 lakh per annum.

Dividend distribution tax is levied by the government on companies and mutual funds on the dividend distributed to their investors.

It is proposed to levy tax at source at the rate of 1% on purchase of luxury cars exceeding value of Rs 10 lakh and purchase of goods and services in cash exceeding Rs 2 lakh. Farmers and notified class of persons will have an option of giving a form by which TCS will not be charged.

It is also proposed to impose an excise duty of ‘1% without input tax credit or 12.5% with input tax credit’ on articles of jewellery [excluding silver jewellery, other than studded with diamonds and some other precious stones], with a higher exemption and eligibility limits of Rs 6 crore and Rs 12 crore respectively.

Currently, for HUFs and a resident individual below 60 years of age, income up to Rs 2,50,000 is exempt from tax, income from Rs 250,001 to Rs 5,00,000 is taxed at 10%, from Rs 5,00,001 to Rs 10,00,000 at 20% and above Rs 10 lakh at 30%. A total cess of 3% of the income tax payable is also levied. On income above Rs 1 crore a surcharge of 12% of income tax is additionally levied on the income tax computed and then the 3% cess is further levied on the total of tax plus surcharge.