On a crude extrapolation, I expect that as a result of the increase in the exemption limit to Rs 50,000, about 15 lakh assessees -- out of the current 150 lakhs -- will go out of the net, costing the exchequer upwards of Rs 1,500 crore. So, Yashwant Sinha has, for all practical purposes, shown that Chidambaram's very next successor could afford what Chidambaram said,no FM could. And this, after expressing concern that "in a country of our size, it is a matter of great anxiety that the total number of assessees constitutes less than 1.25 per cent of our population." (Not a very neat comparison; but that is another matter); and insists that the scope for tax widening remains the single most formidable challenge in the area of direct taxes." Letting go, with a single stroke, 15 lakh assessees out of the net is not terribly consistent with this formidable challenge.

Consisting apart, I for one entirely welcome this move of the FM. I remain convinced that it is futile and counter-productive in our country to attempt to widen the personal-income tax net. If we decide to learn from decades of realities, and if we want best results, we in India must keep this net extremely narrow; and tailored to catch only the really big fish. I would have been happier if the exemption limit were raised to, say, Rs 5 lakhs -- at least for the salary and wage earners.

If ten per cent of theassessees go out of the net, we should have also expected to see the income tax department being downsized by at least 10 per cent. But I see that this department, which was budgetted to cost the nation Rs 397 crore in 1997-98 is budgetted to cost over Rs 600 crore in 1998-99. I am not enthused!

One straight forward and neutral method of tackling this matter of exemption limit is to make it automatic by indexing it to inflation; something similar to what we now have for calculating the capital gains tax. If prices rise by, says, 10 per cent in a year, the exemption limit automatically goes up from Rs 50,000 to Rs 55,000. Many countries have since long adopted this `automatic' route, and have commonly extended it to slabs of income tax too. I suspect that the main reason why we have not adopted this automatic route, is precisely the fact that it is straight forward and neutral. It robs the FM of the opportunity of denying or granting as a great favour, something which is the right of everyassessee.

Another foray of the finance minister on the `widening the tax net' front, is his `one-by-six' scheme, replacing the earlier `two-by-four' scheme. According to government spokesmen, the earlier schemes so far `have met with moderate success' (Read: have failed). The `one-by-six' scheme is intended `to raise the total number of individuals filing their income tax returns by at least 50 per cent during a full fiscal year," that is from 1.5 crore to 2.25 crore.

The finance minister's estimate is certainly courageous. I am tempted to take any reasonable even bet that this intended widening to 2.25 crore shall not materialise. I am sure that the finance minister has not failed to notice the total distrust, fear and hatred with which India's potential (and actual) assessees look at his income tax department. Even the word `net' detests them. Nobody caught in a net ever survives. India's citizens are unlikely to be allured by posthumous `sanman' awards.

Further, since the finance minister'sprime-concern is `revenue', would it not be a lesser evil to levy a small tax directly on each of his six favourite consumption criteria? Why not tax directly an overseas airline ticket, a house property, the purchase of a car, The credit card when issued by the concerned companies, and so on.

Incidentally, the increase in the exemption limit will deprive the treasury of at least Rs 1,500 crore; out of the Rs 19,700 crore it received in 1997-98 from income tax.

I wish the finance minister had came to terms with some persistent realities, had ceased to be the prisoner of conventional wisdom and had initiated some result-oriented reforms in the area of personal income taxBest of all, he should have accepted that the (wrongly) so-called `progressive' income tax has turned out to be a bad policy and no amount of annual tinkering will do. Individual income tax should be scrapped, making an immediate beginning with salaries and wages.

If he could not muster enough courage for it he should have introduced alower tax rate beyond a particular high level of income. For example, the marginal tax rate could have been reduced from the current 30 per cent to, say, 20 per cent for incomes exceeding Rs 10 lakh. We are told that there are only 12,000 assessees filing returns of incomes in excess of Rs 10 lakh. On very rough calculations, it appears that this 12,000 pay an income tax of about Rs 3,000 crore. I am confident that if the above proposals were implemented, the number 12,000 will swell to at least 60,000 in one year; and that these 60,000 will, with a smile, contribute at least Rs 6,000 crore as against the present Rs 3,000 crore. The way to change the mind set is by rewarding the honest tax payers by such incentive rates that will do them a true `sanman.'