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.
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.