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“One need not disturb the structure of income tax system as it is now. But add a surcharge for income above particular level.
“I believe as we go along, we need to raise more revenues and the people with larger incomes must be willing to contribute more,” Rangarajan told reporters on the sidelines of a Financial Inclusion Day seminar.
His suggestion comes ahead of the Budget for 2013-14 for which Finance Minister Palaniappan Chidambaram has started consultations with different interest groups.
India taxes income at three rates — 10 per cent, 20 per cent and 30 per cent.
Chidambaram had earlier called for a debate on the need of inheritance tax in India, wondering if the country had paid enough attention to accumulation of wealth in the hands of a few.
Earlier this week, the US Congress voted for raising taxes on rich Americans, as part of resolutions over the ‘fiscal cliff’ crisis.
The US legislation raises taxes on individual earning more than $400,000 per year, and on couple earning more than $450,000.
India had 61 billionaires in 2012, 4 more than the previous year, according to the Forbes magazine.
A study released by the Prime Minister of India, Manmohan Singh, in 2012 revealed that 42 per cent of Indian children are suffering from malnutrition, which manifests directly from abject poverty.
This is probably the biggest problem that the largest democracy, and the second fastest growing economy in the world, faces today.
According to the World Bank Chief Economist Kaushik Basu, Indian economy should expand by 6 per cent in 2013.