The Telegraph
Since 1st March, 1999
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BJP panel rejects harsh tax proposals

New Delhi, Jan. 28: The BJP today turned poll savvy and rejected some of the harsher provisions of the Kelkar Committee on taxation which could have hit its middle-class vote bank.

In a party report released here today, the BJP attacked the committee’s proposals to abolish standard deduction for the salaried class and tax sops on small savings and housing loans.

It also rejected as inopportune the proposal made by the finance ministry-appointed committee to impose a new tax on farm income. The party document also said the BJP “does not support tax evasion by the non-farmers showing their income from predominantly non-farm activities as farm income”.

The party panel, led by hardline MP Rajnath Singh, said tax sops on housing loan were essential as the BJP-led Centre wanted to encourage people to build their own houses.

The panel also defended the continuance of tax sops on small savings, arguing that, in the absence of a safety net, it was important for the man on the street to inculcate a savings habit.

The party report also pitched for a tax-free savings scheme for senior citizens and an attractive social security scheme for workers in the unorganised sector.

Standard deduction was provided to the salaried class as it had lesser scope to claim legitimate expenses under tax deduction unlike the self-employed, the party report said and emphasised that the deduction should continue.

The panel rejected moves to remove tax exemptions on education loans and medical expenses. It opposed an excise of Re 1 on kerosene, arguing this was the preferred fuel of the poor.

“There is a need to increase revenue. But the interests of the vulnerable sections of society have to be kept in mind,” BJP president M. Venkaiah Naidu said here today.

Behind the statement was the election logic that showed the BJP did best in urban middle-class areas and removal of sops that mainly benefit this class could mean electoral reverses.

The party report highlighted revenue leakage because of the double-tax avoidance treaties India has with many countries.

For the rest, the panel appeared to have accepted much of what the Kelkar Committee was arguing for. The party report admitted that the abolition of tax incentives for long-term savings could be considered if a comprehensive pension scheme was introduced.

Rajnath also supported the Kelkar Committee’s demand for abolition of dividend tax.

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