Mumbai: As the Union Budget 2026-27 approaches, tax experts are advising the government to avoid raising taxes on high-income individuals. They say increasing the income tax surcharge on the super-rich or bringing back the wealth tax could do more harm than good.
Their main worry is that very rich people may choose to move their money or even their residence to low-tax countries, which would reduce investment in India.
How surcharge works today
Currently, people earning more than Rs 50 lakh a year pay an extra tax called surcharge. The rate rises with income:
- 10 percent for income between Rs 50 lakh and Rs 1 crore
- 15 percent for Rs 1 crore to Rs 2 crore
- 25 percent for Rs 2 crore to Rs 5 crore
Those earning above Rs 5 crore pay 25 percent surcharge under the new tax regime and 37 percent under the old tax regime.
Why higher tax could backfire
Amit Rana of PwC said that while richer people should pay more tax, making it too high can push them away from India. He said high-income earners are often the ones who start companies and create jobs.
“If taxes become too heavy, they may not want to stay in India,” he warned.
Wealth tax may not help much
Surabhi Marwah of EY said bringing back wealth tax could create more problems than benefits. The wealth tax was removed in 2015 because it collected very little money but required a lot of paperwork and effort.
She said today’s system of surcharge is simpler and easier to manage than taxing assets like property, gold and shares.
Risk of capital moving out
Gouri Puri of Shardul Amarchand Mangaldas said higher taxes can lead to capital flight, meaning money and families move abroad. This can reduce business activity and job creation in India.
Countries compete globally to keep their tax systems attractive, and harsh taxes can push investors away.
Unlikely to change soon
Alok Agrawal of Deloitte said the government already cut the highest surcharge from 37 percent to 25 percent in 2023 under the new tax regime. Because of this, a hike in such a short time looks unlikely.
