Income Tax Surcharge in Budget 2008

Overall Rating: star ratingstar ratingstar ratingstar ratingstar rating[0/5]Total Votes [  ]  
Rate this page:


There are chances that the income tax surcharge in budget 2008 is likely to be reduced by 50% or may be eradicated altogether. If this happens, the Government will be losing out on approximately, ` 4,000 crores to ` 8000 crores yearly. Simultaneously, the condition of tax compliance looks bright and collection of direct taxes has been chirpy, what is to be seen is whether the Government keeps the word of Industry association. The article below reflects prevailing status of the tax surcharge scenario of the country.

Government officials, economists and industrialists are anticipating that Income tax surcharge in Budget 2008 may be either eradicated altogether or may be reduced significantly. In the event the tax surcharge is reduced there will be many companies, individual taxpayers as well as firms who will enjoy the benefit of the same. If the income tax surcharge in budget 2008 is reduced or eliminated, it will decrease the tax burden by anything between 1.54 to 3.09 percentage points, with effect from FY 2008-2009. For the last 17 years, tax surcharge ranged between 1% and 15%. In case of domestic companies as well as individuals, the surcharge was enhanced from 2.5% to 10% in the year 2005.

Possible causes:

Still better the Ministry of Finance is also thinking of implementing the move. The Ministry is planning to undertake this action because, it has been observed that:
  • Tax compliance is sound and healthy
  • Collection of direct taxes is quite buoyant
The association of industries had made the request of eliminating the 10% surcharge on income tax.

Prevailing status of the tax surcharge prior to Budget 2008: Statistics reveal that currently the tax incidence on corporations, individuals and firms is 33.99%. This figure includes the tax surcharge of 10% as well as education cess of 3%.

If the Tax surcharge is cut down by 50% or halved:
In the event the Income tax surcharge in budget 2008 is reduced by 50%, the tax incidence will be 31.54%.

If the Tax surcharge is removed:
In the event the tax surcharge is eliminated, the tax incidence will be 30.9%.


If the surcharge on tax is reduced or removed, around 2 to 3 million people who have undergone assessment for income tax will be benefited. These people usually belong to the HUF or Hindu Undivided Family, companies and firms will be immensely benefited. It may be mentioned here that the group of people mentioned above belong to the higher income group.

>> More about India Budget