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Govt plans 35% tax for super-rich

The government is expected to propose a higher levy for the super-rich under the new direct tax law, including a 35% levy on those earning more than Rs 10 crore and a heavier burden for people with wealth of more than Rs 50 crore.

The Direct Taxes Code (DTC) Bill that will replace a 50-year-old legislation is to be discussed by the Union Cabinet on Thursday, four years after discussions first began. While the tax slabs will also be reworked, the details will be disclosed by the government in Parliament.

In case of wealth tax, the government will propose to increase the threshold to Rs 50 crore, from Rs 15 lakh currently, with the levy pegged at 0.25%. But against the existing definition that focuses on immovable assets, apart from jewellery, cash and cars, the government has decided to end the bias in favour of financial assets like shares. Through the new definition, the government has proposed to include financial assets within the ambit of wealth tax, arguing that conservative investors should not be penalized.

Although the government has suggested a higher levy for those with an income of over Rs 10 crore, the impact will be marginal, given that this year onwards, those earning Rs 1 crore or more have been slapped with a surcharge that makes the effective tax rate 33%.

Sources told TOI that the government has accepted 153 of the 190-odd recommendations made by the parliamentary standing committee headed by former finance minister Yashwant Sinha.

The committee had suggested raising the income-tax exemption limit from existing levels of 10% for Rs 2-5 lakh, 20% for Rs 5-10 lakh and 30% for Rs 10 lakh & above. The first draft prepared by Chidambaram in 2009 had proposed slabs of Rs 1.6-10 lakh, Rs 10-25 lakh and Rs 25 lakh and above and corporate tax of 25%. Since then major modifications have been undertaken including continuing with most of the tax benefits available to individuals.

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