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Kelkar defends own formula

New Delhi, Dec. 28 (PTI): Vijay Kelkar, advisor to the finance minister, today defended the task force’s recommendations on direct and indirect taxes. Dispelling the concern that the middle class would be hit by the proposals, he said the tax incidence on various income groups would be “much less and not more” as claimed in certain quarters.

Quoting official estimates, Kelkar said that a salaried person earning Rs 80,000 to Rs 1 lakh would pay Rs 1,224 less as income tax while a person earning above Rs 10 lakh would pay Rs 69,597 less.

The relief to non-salaried tax payers range from Rs 382 for an income of Rs 50,000-60,000 to Rs 82,946 for persons earning above Rs 10 lakh, he said.

For senior citizens, Kelkar said the benefit ranges from Rs 3,402 for income bracket of Rs 1.5-2 lakh to Rs 77,196 for income above Rs 10 lakh.

The panel has suggested doubling of the income-tax exemption limit to Rs 1 lakh and a two slab personal income-tax structure of 20 per cent for income of Rs 1 to Rs 4 lakh and 30 per cent for income beyond Rs 4 lakh. It has also raised the income-tax exemption limit to Rs 1.5 lakh for senior citizens and widows.

Justifying the rationale behind the abolition of standard deduction for salaried class, Kelkar said a large number of perks are available to salaried employees which are either concessionally treated or fully exempt thereby reducing the effective tax burden. The perks included conveyance allowance, housing, motor car, medical, telephone and leave travel allowance.

He said the tax burden on any of the allowances has not been increased and that it remained at the same level as at present.

In fact, the proposals are aimed at reducing the tax burden, lowering transaction costs, promoting transparency and are tax payer-friendly, he said.

With the consequent downward reduction in the compliance costs by even 10 per cent, individual taxpayers will have further gains of Rs 4,000 crore per annum, he said.

He did not agree with the view that only the salaried class are being squeezed and said the establishment of nationwide tax information network (TIN) would bring into net all tax evaders.

Without giving details of how TIN would help in cracking down on tax evaders, Kelkar said it will help the department to identify hardcore and other tax evaders, besides substantially improving quality of evidence against them. It will enable the CBDT to launch prosecution.

Also, he said the one-by-six formula will continue, which would help in bringing more evaders into the tax net.

Referring to the data furnished by National Housing Bank, Kelkar said 85 per cent of borrowers availed housing loans up to Rs 5 lakh and the average size of the loans was Rs 2,32,661 with an annual interest payment of around Rs 25,000.

So the proposal for reducing the ceiling on mortgage interest deductible for taxable income purposes to Rs 50,000, would not hurt them, he argued.

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