The Centre has slashed the windfall tax on crude oil from Rs 2,100 to Rs 1,900 in the recent fortnightly review. Additionally, the tax on aviation turbine fuel (ATF) has been decreased from Rs 4.5 to Rs 3.5 per litre, and the export duty on diesel has been decreased from Rs 6.5 to Rs 5, including cess.
WHAT IS WINDFALL TAX ?
A windfall tax is a tax levied by governments against certain industries when economic conditions allow those industries to experience significantly above-average profits.
A windfall tax is a surtax imposed by governments on businesses or economic sectors that have benefited from economic expansion.
The purpose is to redistribute excess profits in one area to raise funds for the greater social good; however, this can be a contentious ideal.
Some individual taxes—such as inheritance tax or taxes on lottery or game-show winnings—can also be construed as a windfall tax.
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After reaching an all-time high of $140 per barrel in March, Brent crude is still being traded in the area of $83-$86 per barrel on the global market.
India became the first country to enact the windfall tax on July 1 and is now one of an increasing number of countries that tax energy companies’ higher-than-average profits.
When windfall tax first became effective, it was imposed on export gasoline in addition to diesel and ATF. Nevertheless, the gasoline charge was eliminated in later fortnightly reviews.
The tax on unforeseen profits is computed by deducting any price that producers receive above a certain level, while the charge on petroleum exports is based on the cracks or margins that refiners make on international shipments.
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Windfall Taxes on Individuals
Windfall taxes may also apply to individuals who gain sudden riches from receiving a significant sum of money through a gift, inheritance, or through game-show, gambling or lottery winnings. In many cases, inheritances, gifts from family members or friends, and life insurance payouts are tax-free to the recipient.
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