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By Molly Ward
March 3—India plans to increase the tax deduction limit by 10,000 rupees ($161.51) for payments toward health insurance premiums and replace the wealth tax with a surcharge on the super rich, Finance Minister Arun Jaitley said Feb. 28 in an annual budget speech to parliament.
The budget for fiscal year 2015 proposes an increase to 25,000 rupees ($403.76) from 15,000 rupees ($242.26) in the tax deduction limit for health insurance premiums.
The limit would rise to 30,000 rupees ($484.52) from 20,000 rupees ($323.01) for senior citizens.
The budget proposal also included an additional deduction of 50,000 rupees ($807.53) for contribution to the New Pensions Scheme.
Jaitley left unchanged the rate of personal tax regarding income earned in fiscal 2015.
The wealth tax would be abolished and replaced with an additional 2 percent personal income tax surcharge on the super rich, who have taxable income of more than 10 million rupees ($161,505) in the 2016-17 assessment year.
Under the changes, the tax rate for individuals earning more than the threshold would be 12 percent. A 2 percent surcharge would apply to individuals, Hindu undivided families, firms, cooperative societies and local authorities having income greater than 10 million rupees. The abolishment of the wealth tax and increased taxes on the super rich will lead to tax collections of 90 billion rupees ($1.45 billion), whereas the wealth tax would earn only 10.08 billion rupees ($162.7 million), Jaitley said.
The budget must be passed by both Houses of Parliament before it can take effect.
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The budget highlights can be found at http://indiabudget.nic.in/ub2015-16/bh/bh1.pdf.
The budget speech can be found at http://indiabudget.nic.in/ub2015-16/bs/bs.pdf.
More information on payroll issues in India can be found in the India country primer.
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