• Investment World
• eWorld
• Catalyst
• Mentor
• Life
• Canvas
• Praxis
• Urban Pulse
• Brand Quest

Stocks

• Quotes
• SE Diary
• Scoreboard
• Open-End Mutual Fund

Cross Currency

• Rates
  
  

Shipping

• Ports
  
  

Archives

• Yesterday
• Datewise
• Resources

Group Sites

• The Hindu
• Business Line
• Sportstar
• Frontline
• The Hindu eBooks
• The Hindu Images

Our Bureau

New Delhi , July 23

THE Kelkar Task Force has suggested a shift to a two-rate structure for personal income tax.

The panel has proposed that annual income below Rs 1,00,000 would be exempt from taxation, while income between Rs 1,00,001 and Rs 4,00,000 should attract a 20 per cent tax and for income above Rs 4,00,000 the tax rate should be 30 per cent.

Currently, personal income tax has a three-rate structure (10 per cent, 20 per cent and 30 per cent) on varying slabs of income.

Along with this, the panel has suggested removal of all exemptions under the various sections of the Income Tax (I-T) Act, barring those relating to housing loans and those available to senior citizens and women. It has also proposed elimination of standard deduction available to salaried employees.

On the savings front, the panel has suggested that the structure of savings incentives should be rationalised into a single EET (Exempt, Exempt, Taxable) system where contributions and accumulations are tax-exempt, but the withdrawals are taxed as ordinary income. This would lead to elimination of tax concessions such as those under section 80L of the I-T Act.

However, it has suggested that all existing investment under schemes such as the Public Provident Fund (PPF) should be "grandfathered" whereby interest on existing deposits would continue to be tax-exempt while all new investments would be part of the EET system.

The above "package" the panel has said would lead to a lower effective average tax rates for all category of taxpayers while at the same time it would rationalise the personal income tax structure.

"The proposals constitute a long overdue rationalisation of personal income tax. Compliance costs would come down, higher buoyancy would be obtained, equity will be enhanced and the economy will benefit from reduced tax distortions," the panel said.

More Stories on : Income Tax

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Stories in this Section
First salvo

Copyright © 2004, The Hindu Business Line. Republication or redissemination of the contents of this screen are expressly prohibited without the written consent of The Hindu Business Line