The ministry, which is closely examining the Parthasharthi Shome Committee report on Tax Policy and Tax Administration Reforms, may not raise the income tax limit for the fear of losing revenue and also tax payers in the lower income bracket.

The new tax slabs being contemplated are Rs 50,001 to Rs 1 lakh (as against existing Rs 50,001 to Rs 60,000); Rs 1,00,001 to Rs 2 lakh (Rs 60,001 to Rs 1.5 lakh); and above Rs 2 lakh (Rs 1.5 lakh). These slabs will attract tax rates of 10 per cent, 20 per cent and 30 per cent respectively. Presently the three slabs attract similar rates alongwith a surcharge.

The committee has strongly recommended the removal of surcharge on income tax. The surcharge varies from 10 per cent to 15 per cent depending upon the tax slab. Those falling in the tax slab of Rs 60,000 to Rs 1.5 lakh pay a surcharge of 10 per cent. While tax assessees having an income of more than Rs 1.5 lakh pay a surcharge of 15 per cent. As per the tax structure suggested by the Shome Committee, an individual having a taxable income of Rs 1.5 lakh will have to pay a tax of Rs 15,000 as against Rs 20,900 at the current rates of taxes. Similarly an individual having a taxable income of Rs 2 lakh will have to pay Rs 25,000 as against Rs 39,100.

The Shome Committee report said that removal of surcharge and changes in tax slabs might result in a revenue loss of Rs 6,000 crore at the current level of compliance. However, the theoretical revenue loss would be more than neutralised in on account of expected improvement in compliance.

The committee has said that in future government must desist from imposing surcharge since "these have the effect of increasing marginal rates of tax which adversely affect compliance. The revenue gain from such discretionary change is always illusory." The report further added that all such levies should only be charged through the adjustment in the base tax rates to avoid complexities in tax calculations.