Date:21/01/2003 URL: http://www.thehindu.com/2003/01/21/stories/2003012104221100.htm

National

Poll year concerns reflect in Rajnath report on I-T

By Our Special Correspondent

NEW DELHI JAN. 20. The Rajnath Singh committee of the Bharatiya Janata Party has not favoured the doubling of the income-tax exemption limit in one go from Rs. 50,000 to Rs. 1 lakh. Instead, it suggested in its final report, submitted today to the party president, Venkaiah Naidu, that this should be increased "in phases".

At the same time, it strongly suggested the retaining of the existing standard deduction of Rs. 20,000 for salaried employees, recommended for abolition by the Kelkar task force. The party's argument is that there is no case to equate the salaried employees with the self-employed since the former have little scope to evade tax and are perhaps the only group which pays its full tax.

The party committee welcomed the Kelkar proposals for raising the income tax exemption limit for senior citizens by Rs. 50,000 to Rs. 1.5 lakhs and the extension of this benefit to all widows irrespective of age. It said the proposal to do away with the special tax rebate for women was "not acceptable".

As expected, the committee favoured continuing the tax concessions on housing loans and savings on investments in infrastructure bonds as well as maintaining the status quo on tax rebates for medical expenses.

The party is confident that its recommendations will be favourably considered by the Union Finance Minister, Jaswant Singh, and reflected in the budget to be presented next month. The final report seems to have accepted some of the Kelkar proposals while it amended or rejected others to reduce the tax burden on the salaried class.

On two points the BJP is firm — no tax on agricultural income and no tax on cooperatives. If there were some who were showing income from other sources as agricultural income to evade tax, a more vigilant tax department could catch the culprits but that could not be an excuse for taxing agricultural income, the party report said. The Kelkar report had suggested taxing the profits of cooperatives in the same manner as corporate profits but the party felt that since this sector played an important part in the rural economy and the unorganised sector, there was no case, certainly no political case, for taxing it.

The Rajnath Singh report favours retaining the one rupee petrol cess as a way of getting funds for better roads.

The eight-man committee had 11 sittings and it also met different interest groups as well as Mr. Kelkar himself in a bid to remove areas of disagreements.

The BJP is against the Kelkar proposal to reverse the duty-free production limit for the small scale sector from Rs. 1 lakh to Rs. 50,000 as this would lead to many SSI units becoming sick.

On dividend distribution tax, the Rajnath Singh committee has said that this could be "re-introduced at the hands of companies" while removing it at the hands of recipients. On various tax administration measures, the Rajnath committee was all praise for the Kelkar recommendations, but the political message was clear: with a number States going to the polls this year, the party cannot afford to annoy the salaried middle class, the farmer, the cooperatives and the small scale industrial sector.

It will be for the Finance Minister to worry about getting the revenue.