The Finance Ministry is contemplating removing certain “unwanted discretions” as part of an exercise to streamline taxation structure and improve the country’s image as attractive investment destination, sources said.

The objective of the exercise, they said, was to come out with “clear cut guidelines” on taxation with a view to prevent controversies pertaining to retrospective amendment of tax laws.

The stress will be on transparency, predictability and stability in the Indian taxation system.

All eyes would be on Finance Minister Arun Jaitley who is presenting the Union Budget tomorrow. In the last Budget, he had announced phased reduction in corporate tax to 25 per cent from the current 30 per cent and elimination of tax exemptions to companies.

Regime of exemptions has led to pressure groups, litigation and loss of revenue, and also leaves room for discretion (which many times have lead to controversies).

“Following recommendations from various departments, there is a need to have a fresh look at the existing tax exemption structure.

“The exercise holds importance as it will help in reducing discrepancies and discretions in the exemptions as well as introduce the much needed transparency in taxation,” the source added.

The retrospective tax laws have adversely impacted India’s image globally as an attractive investment destination, sources said.

“Experts are of the view that lack of transparency and unwanted discretion in existing tax laws are solely responsible for such episodes. There is an urgent need to address these issues as unnecessary exemptions also lead to loss of revenue.”

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