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Budget 2019: FM Nirmala Sitharaman shuns wealth tax, but increases surcharge for super rich

Wealth tax was abolished in the Budget 2015 as the cost incurred for recovering taxes was more than the benefits derived from it.

ET Online|
Updated: Jul 05, 2019, 04.13 PM IST
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Budget 2019: Pre-filled tax return forms, faceless assessment proposed
Budget 2019: Pre-filled tax return forms, faceless assessment proposed
NEW DELHI: The much anticipated tax on properties, jewellery, shares, fixed deposits (FDs), cash in bank inherited has been shunned in the Union Budget 2019 by FM Nirmala Sitharaman .

Instead, the FM has proposed to increase surcharge for those earning Rs 2-5 crore to 3 per cent and for those earning above Rs 5 crore to 7 per cent.

It was widely expected that Sitharaman was going to reintroduce the estate or wealth tax in her maiden budget. Fortunately for the wealthy, it did not happen. Wealth tax was actually introduced on the richer section of the society many decades ago. The intention of this levy was to bring parity among different classes of taxpayers. However, it was abolished in the Budget 2015 as the cost incurred for recovering taxes was more than the benefits derived from it.

Explaining the rationale behind abolishing the wealth tax, FM Arun Jaitley in his 2015 Budget speech noted that, "The total wealth tax collection in the country was Rs 1,008 crore in 2013-14. Should a tax which leads to high cost of collection and a low yield be continued or should it be replaced with a low cost and higher yield tax? The rich and wealthy must pay more tax than the less affluent ones. I have therefore decided to abolish the wealth tax and replace it with an additional surcharge of 2% on the super-rich with a taxable income of over Rs 1 crore."

"This will lead to tax simplification and enable the Department to focus more on ensuring tax compliance and widening the tax base. As against a tax sacrifice of Rs 1,008 crore, through these measures the Department would be collecting about `9,000 crore from the 2% additional surcharge. Further, to track the wealth held by individuals and entities, the information regarding the assets which are currently required to be furnished in wealth-tax return will be captured in the income tax returns. This will ensure that the abolition of wealth tax does not lead to escape of any income from the tax net," Jaitley explained in his 2015 Budget speech.

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