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(Precious) Words of Wisdom : "The art is not in making money, but in keeping it." ~ Proverb

Talks of increasing the tax rates on the rich is an eyewash

There have been talks of increasing the tax rate on the rich from 30% to as high as even 40%. Or to levy a surcharge on higher incomes.

This, however, is just to keep the poor and ignorant public happy. The higher income tax rates make no difference to the rich.

Why?


Because, a major portion of their earning DOES NOT come from salary income. So even if the tax rates are 40-50%, it will pinch them just a little.

Instead the focus should be taxing their REAL income.

Their real income comes from:


a) Dividends : And these are taxed at just 15% even if the dividend income runs into crores


b) Capital Gains on sale of shares : Long Term Capital Gains is Tax-free. Short Term Capital Gains is taxed at 15%, even if this income runs into crores

c) Rental income : Many deductions are allowed on rental income. But every rupee of interest income that a common investor earns on FDs is taxed. Why this discrimination?   

d) Capital Gains on sale of property : Many deductions are allowed on sale of property. And if invested in another property/specified bonds, then even this lower tax can be avoided.

These are the areas where change in tax policy will make real difference.


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