Revenue secretary Ajay Bhushan Pandey  (Mint file)
Revenue secretary Ajay Bhushan Pandey  (Mint file)

Rich people will not flee if tax rates go up by a small measure: Revenue secy

  • 'This is an unfounded fear. nobody decides to leave the country for an increase in tax rate by a few percentage points'
  • 'People love their country, its culture and are proud of it. Nobody takes a decision to leave the country on the basis of a tax rate increase by a small measure'

New Delhi: The government on Saturday defended its decision to raise the tax rate on high-income earners, saying it will not lead to affluent people moving to other countries.

Revenue secretary Ajay Bhushan Pandey said in an interaction with reporters that people's attachment to their country was far too strong to be affected by an increase in their tax outgo.

According to the Income Tax Act, only those who meet the riders relating to physical presence in India for a number of years to qualify as 'resident and ordinarily resident' are required to disclose their foreign assets and pay taxes on their global income in India. Non-residents as well as those who qualify to be 'residents' because of physical presence in India in any fiscal year, but are not 'ordinarily resident' for not being in India for past several years, are required to pay only their income earned in India. This gives an incentive for the affluent with business presence in India to live abroad. Pandey, however, downplayed fears of high networth individuals moving out of the country.

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"This is an unfounded fear. nobody decides to leave the country for an increase in tax rate by a few percentage points. People love their country, its culture and are proud of it. Nobody takes a decision to leave the country on the basis of a tax rate increase by a small measure," said Pandey.

Finance minister Nirmala Sitharaman had proposed raising the surcharge on the income tax paid by individuals earning more than 2 crore a year in the FY20 budget. According to the proposal, the surcharge on individuals with income in the range of 2-5 crore will have their effective tax rate go up by 3% and the same on those earning more would go up by 7%.

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