Citing half-yearly financial figures of 873 companies listed on the BSE, CII has stated that a sample representative of first half financial results of large and medium companies shows a distinct improvement over the previous year. Net sales increased 24 per cent, while gross margins were up by over 15 per cent. "Such buoyancy will allow for greater revenue elasticity. In other words, the increase in corporate tax revenue because of profit before deduction of income tax (PBDIT) and gross profit growth will outweigh the fall due to eliminating the surcharge," CII has states in its pre-budget memorandum to the finance ministry.

Moreover, last year, there was a valid revenue reason - unanticipated expenditure incurred due to Kargil. There is no such exigency this year, it added.

"Over the years the corporate tax rates have seen gradual scaling down and is at present more or less in tune with international levels but the introduction of surcharges have resulted in an increase in the effective rates," the statement said.

While suggesting that the 10 per cent surcharge on corporate income tax must be eliminated, the apex industry association said: "The government should, however, keep the 1 per cent surcharge for financing calamity relief."

Companies pay a surcharge of 11 per cent on corporate income tax, an additional 1 per cent was introduced to finance national calamity relief.

24 per cent, and gross margins by over 15 per cent. Commenting on the personal income tax structure, CII urged the government to eliminate the 10 per cent surcharge at the 20 and 30 per cent slabs and also to raise standard deduction from Rs 20,000 to Rs 35,000. It suggested to raise the limit to Rs. 25,000 from Rs. 15,000 in the case of medical treatment.

Recognising the fact that the salaried earners are a class of taxpayers, who duly comply with the tax laws and taking into account the increased cost of living, CII recommended to urgently look into simplifying and rationalising provisions relating to taxation of benefits and perquisites. CII also urged the government to eliminate the dividend tax of 20 percent. "Companies pay tax on their profits and what is left is post tax income, which is then allocated between shareholders and reserves.