Less income, more tax
For those of you who think the 30 per cent peak income tax rate along with an education cess of three per cent is way too high, here's something that could make you feel better.
Forty years ago, an individual in the highest tax bracket (above Rs 70,000 per annum) had to pay 70 per cent income tax. And, the basic exemption limit was only Rs 6,000.
In 1974-75, there were eight tax brackets.
In the '80s, things improved as the basic exemption limit was increased to Rs 15,000 and the highest rate (applicable for income above Rs 1 lakh a year) was reduced to 55 per cent.
Real reforms, both in terms of tax rates and tax brackets came in the 1990s. The number of tax brackets was slashed to four and the tax rate was brought down to 40 per cent.
The tax rates now stand at 10, 20 and 30 per cent, with an educational cess of three per cent. There is an additional 10 per cent surcharge on incomes of more than Rs 1 crore.
In total, those in the top income tax bracket pay tax at the rate of 36.3 per cent.
Text: Neha Pandey Deoras, Business Standard
Image courtesy: Reuters