Sunday, November 12, 2023

India tax surcharge around 50 lacs and how it impacts the actual in hand money (marginal relief on the surcharge payable)

 I have allways known that their is some surcharge around the 50 lac mark that impacts how much tax you pay as your income exceeds 50 lacs, 1 crore and so on. Below are the slabs.

Income Range

> Rs.50 lakh

> Rs.1 crore

> Rs.2 crore

 > Rs.5 crore 

Surcharge Rate

10%

15%

25%

37% 

However this would imply that a person earning 50,00,000 would pay additional 10% tax compared o the person earning 49,99,999, this is unfair and hence the provision of a marginal relief on the surcharge payable kicks in as follows (Explained below) 

Below i have computed the actual tax payable and in hand income after tax.

Notice, there is a dead zone from 50 to 53 lacs where increase in salary is not leading to any increase in in-hand income due to surcharge kicking in




According to the Income-tax provisions, a marginal relief will be provided to certain taxpayers up to the amount of the difference between the excess tax payable (including surcharge) on the income above Rs.50 lakhs and the amount of income that exceeds Rs.50 Lakhs. 
Suppose, an individual has a total income of Rs.51 Lakhs in a FY 2022-23.

  • He will have to pay taxes inclusive of a surcharge of 10% on the tax computed i.e., total tax payable will be Rs. 14,76, 750.
  • But, if he would have earned only Rs.50 lakhs, then the tax liability would have been Rs.13,12,500 only(excluding cess). 
  • Isn’t it unfair for the individual? For earning an extra Rs.1,00,000, he will end up paying income tax of Rs.1,64,250. The individual’s tax liability should be reduced to avoid any such excess tax payable. 
  • The individual will get a marginal relief of the difference amount between the excess tax payable on higher income i.e (Rs.14,76, 750 minus Rs.13,12,500 = Rs.1,64,250 ) and the amount of income that exceeds Rs. 50 Lakhs i.e. (Rs.51,00,000 minus Rs.50,00,000 = Rs.1,00,000). 
  • The marginal relief will be Rs.64,250 (Rs.1,64,250 minus Rs.1,00,000). 
  • Hence, income tax liability on income of Rs. 51,00,000 will be Rs.14,12,500 (excluding cess)





Friday, October 20, 2023

The Teddy Bear


Tanya clutched the teddy bear to her chest, her eyes sparkling with joy. She looked up at her father, who was standing beside her with a weary smile. "Please, daddy, please," she begged. "Can I have it? It's so soft and cuddly. And it has a pink bow, just like mine. Please, daddy, please."
 Her father sighed and stroked her hair gently and said, "Beta, you know we can't afford it. We have to save money. Aur aapne abhi recently hi to itne saare toys liye hain, We will buy it later ?"
 She shook her head stubbornly and hugged the teddy bear tighter. "But I love it, daddy. I love it more than anything. It's my new best friend. It will keep me company when you're at work and mommy's at school. It will make me happy when I'm sad. It will listen to all my secrets and dreams. Please, daddy, please. I want it NOW" 
Her father felt a pang of guilt and sadness in his heart. He wished he could give his daughter everything she wanted, but he knew he couldn't.
He looked into his daughter's hopeful eyes and felt his resolve weaken. He knew he shouldn't spoil her, but he also hated to disappoint her. He loved her more than anything in the world, and he wanted to make her happy.

He reached into his pocket and pulled out his wallet. He hesitated for a moment, then he thought about his daughter's smile and laughter and happiness that he had to give her.

He smiled back at her and said, "Okay, sweetie, okay. You can have it." 
 She squealed with delight and threw her arms around him. "Thank you, daddy, thank you," she said. "You're the best daddy in the world."
She loved her teddy bear more than anything in the world. It was a gift from her daddy. It was soft and fluffy, with brown fur and black eyes. It had a pink bow around its neck, just like hers. She named it Rosie, after her favorite flower.
 She took Rosie everywhere with her. She played with it in the garden, where they picked flowers and chased butterflies. She read stories to it in the living room, where they sat on the couch and snuggled. She sang songs to it in the kitchen, where they helped mommy bake cookies and cakes. She shared secrets with it in the bathroom, where they brushed their teeth and combed their hair.
But her favorite place to be with Rosie was in her bedroom, where they slept together every night. She tucked Rosie under the covers, next to her pillow. She hugged Rosie close to her chest, feeling its warmth and softness. She whispered "I love you" to Rosie, and Rosie whispered back "I love you too". She closed her eyes and drifted into a peaceful sleep, dreaming of happy adventures with Rosie.
 She felt safe and happy with Rosie by her side. Rosie was more than just a toy. Rosie was her best friend. 
 The one day while shopping with her mother she lay her eyes on something new... She stared at the barbie doll in the shop window, her eyes wide with wonder. She had never seen anything so beautiful in her life. The doll had long blonde hair, blue eyes, and a pink dress. She wore a tiara on her head and a necklace around her neck. She looked like a princess. 
 She pressed her nose against the glass, wishing she could touch the doll. She imagined how it would feel to hold the doll in her arms, to brush her hair, to dress her up. She imagined how the doll would be her friend, how they would play together, how they would share secrets and stories.
She wanted the doll more than anything in the world. 
 She turned to her mother, who was holding her hand. She tugged at her sleeve and pointed at the doll. "Mommy, mommy, look," she said. "Can I have it? Please, mommy, please." 
 Her mother looked at the doll and then at the price tag. She shook her head sadly and said, "I'm sorry, Beta, we can't afford it. Apne abhi hi to Teddy Bear liya hai."
She felt a surge of disappointment and sadness in her heart. 
She looked at the doll again and felt a tear roll down her cheek. She wanted the doll more than anything in the world. But she knew she could never have it. Not till she Had Rosie.
Bit by bit she stopped playing with Rosie and couldn't really rememeber why she had got her in the first place. Her bow had gotten muddy, eyes fuzzy and she had lost a lot of its fur which made it less cuddly. She couldn't even change the colour of her shoes. 
Tanya had grown up a lot in the last year. She was almost a teenager now, and she wanted things that suited her age. All her friends had fancy new dolls that could talk and walk and do all sorts of things. Rosie embarrassed her in front of her friends. 
 Slowly a conspiracy hatched in her head. What if something were to happen to Rosie, something to make it go away, something which wasn't her fault. She lay in her bed brooding about it while Rosie's heavy judgmental eyes stared at her. Surely She couldn't hurt Rosie, or could she ?
 By and by Rosie grew even weaker losing her bow and one of her eyes popped out. Tanya played with her even less and hid her deep inside her closet, where she was forgotten and neglected. There she suffered from dust and bugs and mold.
 Till one day .. The unthinkable happened. 
Rosie went away.... 
No one knew where she went or how to find her. Tanya was beside herself with grief. She cried and cried in front of her dad, who tried to comfort her. He wondered what he could do to make Tanya feel better. Her mom suggested buying the doll for Tanya, thinking it would cheer her up. Her dad agreed and took Tanya to the shiny new doll store and bought her the fairy tale dress up set.

Tanya was overjoyed.
Rosie winked from under the gutter hole, happy for Tanya's happiness. Tanya's secret was safe with her, buried deep in her heart. They shared a special bond that no doll could ever replace.

Rosie knew that one day Tanya would realize that too.

And she would wait for her.

Forever.