Kelkar To Sugarcoat The Bitter Pill

New Delhi, November 26: | Updated: Nov 27 2002, 05:30am hrs
The taskforce on direct taxes, headed by Vijay Kelkar, advisor to the finance minister, in its final report is likely to drop big-bang approach to removal of exemptions for streamlining the taxation structure. However, the final report may contain some critical measures for which the government will not have to renege on its commitments to the people.

Sources associated with the taskforce said the panel was expected to soften its stand on removal of exemptions involving government commitments, including the ones provided under section 10A, section 10B, section 80IA and section 80IB of the Income Tax Act.

They added that the taskforce, in its final report to be submitted in the first week of December, is also likely to suggest continuance of the standard deduction available to the salaried taxpayers.

The panel, in its consultation paper, has recommended immediate removal or phasing out of deductions of profits and gains allowed under section 10A, section 10B, section 80IA and section 80IB in three years, beginning 2003-04, without a sunset clause and also abolition of standard deduction.

Sources, however, pointed out that in case of tax exemptions on housing loans, the Central Board of Direct Taxes has told the taskforce that the benefits available to the interest part at present is not justified. They added that the panel would take a final view on the basis of the feedback received from various quarters.

It may be noted that finance minister Jaswant Singh has already indicated the governments reluctance to touch exemptions where it has made commitments to the tax-payers. In an interview to FE (Nov 16), Mr Singh had said the government could not renege on its tax commitments including the ones made to the housing and other infrastructure sectors.

Deductions under section 10A and section 10B is allowed to software and other exports from specified zones and export oriented units. Section 80IA involves similar benefit in respect of profit and gains from industrial undertakings or enterprises engaged in infrastructure development or telecommunication services or development of industrial park or special economic zones or generation, transmission or distribution of power. Section 80IB benefit is available in respect of profits and gains from certain industrial undertakings other than infrastructure development undertakings which includes backward areas.

Among others, the taskforce, in its consultation paper, has also recommended removal or phasing out of section 80JJA in respect of profits and gains from business of collecting and processing biodegradable wastes.

Sources said the changes in the consultation paper would be made on the basis of feedback on the recommendations.

Dr Kelkar, too, has stressed at various seminars on the proposals of the taskforce that the recommendations made in the consultation paper would be smoothened in the final report.

Sources said the taskforce was likely to submit a compendium of the recommendations to be considered for implementation in the Budget for 2003-04.