Budget Demand: Ahead of Budget 2026, tax experts have urged the government not to increase the income tax surcharge on the super-rich and to refrain from reintroducing property tax. Experts believe that a higher tax burden could lead high-income earners to relocate to countries with lower taxes, increasing the outflow of capital and talent from India. This could negatively impact investment, employment, and economic growth.
Budget Demand: Finance Minister Nirmala Sitharaman will present the Union Budget in the Lok Sabha on February 1, 2026. While the country's middle class, businesses, and industry are hoping for significant relief from this budget, the 'super-rich' are also closely watching the government's decisions. Ahead of the budget, tax experts have demanded that the government not increase the income tax surcharge on the super-rich in the 2026-27 budget and avoid reintroducing property tax.
Increased Surcharge Risks Capital Flight
Tax experts believe that if the tax burden on the super-rich is further increased, it could accelerate the process of high-income earners relocating to countries with lower taxes. In today's world, both investment and residency are increasingly borderless. Therefore, excessively high tax rates could encourage the flight of capital and talent from India, which could prove detrimental to the economy in the long run.
What is the Surcharge Structure in India?
Currently, an income tax surcharge is applicable on annual income exceeding Rs 50 lakh in India. A 10% surcharge is levied on income between Rs 50 lakh and Rs 1 crore, 15% on income between Rs 1 crore and Rs 2 crore, and 25% on income between Rs 2 crore and Rs 5 crore. Those earning more than Rs 5 crore pay a 25% surcharge if they opt for the new tax regime, while under the old tax regime, this rate reaches up to 37%. According to experts, this is already quite high. Pressure on Government Coffers
According to independent economists, the government is projected to face a revenue shortfall of approximately two lakh crore rupees in the current financial year due to GST rate cuts and lower-than-expected income tax collections. In the financial year 2026-27, the government will require additional resources for increased spending on defense, infrastructure, and social sectors. This is why discussions about raising taxes are intensifying, but experts are warning that upsetting the balance could be costly.
Vertical Equity is Necessary, But So is Balance
According to Amit Rana, Partner at PwC & Company LLP, the income tax system is based on the principle of 'vertical equity'. This means that those who earn more should have a higher tax liability. He also stated that excessively high tax rates increase the risk of unintended consequences. If taxes are too high, high-income earners might choose to leave India, which is entirely possible in today's globalised world.
HNIs May Leave the Country: EY
Surabhi Marwah, Tax Partner at EY India, echoed similar concerns. She said that if the surcharge is increased further or property tax is reintroduced, there is a greater risk of high-net-worth individuals (HNIs) migrating to countries with lower tax rates. She added that this group plays a crucial role in industry, investment, and job creation.
A Difficult Balancing Act for the Government
Overall, Budget 2026 will be a test of the government's ability to strike a balance. On one hand, there is the need to increase revenue, and on the other hand, the challenge of retaining investment and talent within the country. Experts suggest that instead of imposing an additional burden on the super-rich, the focus should be on broadening the tax base and improving compliance.
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