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Kelkar's report on tax benefits

Q: It has been claimed in the final report from Kelkar that the tax incidence on various income groups could be much less and not more as claimed in certain quarters. I am herewith giving a number of illustrations taken from several cases, which would show that the claim is not correct. It is necessary to point out that this claim is not justified.

A: V. Krishnamoorthy, IRS (Retd.) has given as many as six illustrations to prove his point. There would be some increase in tax for some pensioners, who are senior citizens, if Kelkar's report is implemented, since they would lose both standard deduction, deduction under Sec. 80L and tax rebates under Sec. 88 and rebate for senior citizenship under Sec. 88B, even as pointed out by the reader through his illustrations. But senior citizens in final report are recommended tax relief up to Rs. 10,000, if the proposed increase for exemption limit for senior citizens and widows to Rs. 1.50 lakhs is accepted. Even so, there can be marginally higher tax in some cases.

There could also be marginally higher liability for those with salary income in the income bracket of Rs. 1 lakh to Rs. 1.50 lakhs, since the only relief they would get by enhanced exemption limit would be Rs. 9,000 in tax, but the larger benefit which they would have got by tax rebate under Sec. 80L and 88, besides standard deduction, would be missed, if Kelkar recommendations are fully accepted. Probably, something should be done for this class, if the scheme is to be adopted.

As for the claim that the proposals would benefit all classes, it has to be understood in the broader sense that most of the taxpayers would benefit from the proposals, if implemented.

S. Rajaratnam

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