Surcharge hike or wealth tax may trigger capital flight, say analysts
January 11, 2026: Tax experts have cautioned the government against increasing the income tax surcharge on high earners or reintroducing a wealth tax in the 2026-27 Budget, warning that such moves could drive high-net-worth individuals to low-tax jurisdictions. They argue that India already has a steep progressive tax structure and making it more punitive could hurt the country’s ability to retain capital and talent.
Experts pointed out that while the government faces revenue pressures due to GST rate cuts and lower income tax collections, higher taxes on the super-rich may prove counterproductive. PWC & Co LLP Partner Amit Rana said taxation must follow the principle of vertical equity but should remain balanced, as excessive rates could prompt wealthy individuals and entrepreneurs to relocate, impacting job creation and industrial growth.
Other tax professionals echoed similar concerns, noting that wealth tax was abolished in 2015 due to low collections and high administrative costs. EY, Deloitte and legal experts said stability and predictability in the tax regime are crucial, adding that the recent reduction in the highest surcharge rate makes another hike unlikely in the near term, with the government instead focusing on improving compliance through technology-driven enforcement.