July 5 (AZINS) Union Finance Minister Nirmala Sitharaman announced that the highest earners in the country will now have to pay additional surcharges on their income tax. She said the hike in surcharge was meant to increase the contribution of the highest earners to the nation's development.

"We are thankful to the taxpayers who play a major role in  nation building by paying their taxes. However, in view of rising income levels, those in the highest income brackets, need to contribute more to the nation's development," Nirmala said in her first Budget speech to the Lok Sabha.

"I, therefore, propose to enhance surcharge on individuals having taxable income from Rs 2 crore to Rs 5 crore and Rs 5 crore and above so that effective tax rates for these two categories will increase by around 3% and 7% respectively," she added.

This means that the effective tax rate for those earning in the Rs 50 lakh - 2 crore bracket would remain where it is with a 10 percent surcharge on their income tax. For those with taxable incomes in the Rs 2-5 crore level, the effective tax rate will fall in the range of 37 percent, and about 41 percent for those earning more than Rs 5 crore.

So far, the surcharge was calculated at 10 percent of the income tax for those with taxable incomes in the Rs 50 lakh - Rs 1 crore level, and 15 percent of the income tax for those who earned more than Rs 1 crore.