A slew of pre-budget suggestions by the industry body also included implementation of comprehensive Goods and Services Tax (GST) in 2015 and review of General anti-avoidance rules (GAAR).
"The government could ideally declare as policy that retrospective action shall not be resorted to, save in rarest of cases, but never for creating a fresh onus or liability for a previous period. In fairness, retrospective change if needed must invariably favour the taxpayer," FICCI President Sidharth Birla said in a statement.
He added that a non-adversarial, conducive and fair tax regulatory environment is the need of the hour to support the forward looking development and delivery-oriented agenda of the new government.
Citing concerns related to taxation of capital, Birla said: "Provisions which effectively deem portions of capital to be in the nature of income are serious deterrents to genuine transactions, while keeping the door open for aberrant behaviour.
"Fishing expeditions harm business atmosphere and reputations. Rapid disposal of cases and enquiries is essential, unless there is clear evidence of wrongdoing."
India must show that it values and welcomes capital, and supports it by clear and credible policies, Birla said.
The industry chamber also suggested that changes can be examined in laws to aggressively widen tax base, simplify laws and rationalise exemptions.
To promote entrepreneurship, FICCI suggested introducing "start-up rebated tax (START)" in line with other Asian countries.
Reviewing the relevance of Direct Taxes Code (DTC) was another suggestion. Most changes already incorporated in the law, FICCI said.
The pre-budget suggestions also included possible steps on illegal assets abroad through tax net.