According to tax experts, the government should avoid increasing the income tax surcharge on the super-rich and re-introducing the wealth tax in the upcoming Budget 2026-27. Experts believe that by doing this, people earning higher income can be motivated to go to countries with lower tax rates.
How much is the income tax surcharge?
Currently, income tax surcharge is levied on people with income above ₹50 lakh. They have to pay 10 percent surcharge on income between ₹50 lakh and ₹1 crore, 15 percent on income between ₹1 crore and ₹2 crore, and 25 percent on income between ₹2 crore and ₹5 crore. Those earning more than ₹5 crore and opting for the new income tax regime will have to pay a 25 per cent surcharge.
People in the old tax system pay surcharge at the rate of 37 percent. According to estimates by Independent Economists, the reduction in GST rates and lower income tax collections are likely to lead to a revenue shortfall of about ₹2 lakh crore in the current financial year. Any additional source of revenue in FY 2026-27 could help the government provide more funds to defense and other sectors.
Expert opinion
PwC & Co. LLP partner Amit Rana said income tax follows the principle of vertical equity, which means people who earn more should have higher tax liability. “When you raise taxes too much, you risk losing high-income earners who don’t want to live in India, and that’s possible in today’s world,” he told PTI.
He further said that a careful balance should be struck in imposing tax on people with high income, because they are the ones who create industries and jobs. Surbhi Marwah, tax partner, EY India, also stressed that if the surcharge is increased or the wealth tax is reintroduced, there is a risk of high-net-worth individuals (HNIs) leaving the country for lower tax countries.