Investment World
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Taxation
Higher tax surcharge: No major impact
B. Krishnakumar
THE special surcharge of 2 per cent (for the Gujarat earthquake crisis) imposed in the 2001-02 Budget has been abolished in the latest Budget. However, a fresh surcharge of 5 per cent has now been imposed. This surcharge would be applicable to all tax-payers except individuals and Hindu Undivided Families that have a total income of up to Rs 60,000. For the corporate sector, with the basic tax rate at 35 per cent, the effective tax liability after the surcharge would work out to 36.75 per cent as against 35.7 per cent.
The net incremental impact for the corporate sector would not be all that taxing considering the additional outflow for a sample of the top 3,600 tax-paying companies works out to Rs 530 crore — less than one per cent of the cumulative profit before tax for these companies which amounted to Rs 57,800 crore.
Companies such as ONGC, SBI, ITC and Hindustan Lever would have significant additional outgo on account of the proposal relating to the surcharge.
In SBI's case, the incremental outflow works out to around Rs 28.56 crore and for VSNL it works out to around Rs 23 crore. The additional surcharge outgo calculated on a per share basis is not all that significant either.
For MRF, the additional net per share outflow works out to about Rs 2.24, while for Hindalco it is Rs 1.1.
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