Revenue Secretary PV Bhide tells Business Standard that tax proposals cannot satisfy everyone. Excerpts:

Why has the income tax deduction limit not been hiked under Section 80C?

We cannot have both -- an increase in deduction as well as a hike in the exemption limit. We cannot satisfy everyone. The increase in tax slabs will encourage more people to declare their income.

So, what is the thinking behind the higher exemption limit?

The hike in the exemption limit from Rs 1,10,000 to Rs 1,50,000 is a fair one. We wanted to give something substantial back to taxpayers as a reward. It will not take much time for these people to come back to the tax bracket again, as salaries are rising by 15-20 per cent annually.

If not this year, they will come back again as they cross the threshold limit. We want to increase consumption by creating demand and leaving more money in the taxpayer's hands. If you include deductions under Section 80C, the exemption goes to Rs 2,50,000 per individual. It is not a small amount. It is even higher for senior citizens.

What impact will the excise rate cut have?

If not directly, we have done a lot indirectly to give up a push to the industrial sector. Excise has been cut across the board to 14 per cent from 16 per cent and this will boost manufacturing.

Is the Budget estimate for revenue collections conservative?

No. The Budget estimate for direct taxes is Rs 3,65,000 crore (Rs 3,650 billion), as compared to the revised estimate of Rs 3,04,760 crore (Rs 3,047.6 billion) for 2007-08. An increase of Rs 65,000 crore (Rs 650 billion) is not a small amount.

What is the rationale behind the Commodities Transaction Tax? How much is likely to be generated as a result?

Why should it be different from the tax on share transactions? There was a need to track what is going on in futures and options. At this stage, it is difficult to say how much revenue will be generated from CTT.

Is the increase in capital gains tax aimed at curbing volatility?

Yes, to some extent. It is aimed at encouraging people to stay invested for long (in the stock market).

Could more services have been brought under the tax net?

We have brought four new services under the tax net and redefined the scope of some existing ones. We will catch the big guys who are providing customised software, but not paying service tax.

We are trying to capture the buoyancy in services. If today we are getting Rs 50,000 crore, actually it should be even much more. Similarly, money changing services provided by companies as well as individuals should also be liable to tax.

What about the changes in withholding tax norms?

We are only making clear the legislative intent of the earlier Act. There were some instances of misuse of the relevant sections, as a result of which the very purpose of the Act was being defeated.

Why have Commissioners of Income Tax been empowered to grant immunity from penalty and prosecution in abatement cases?

We have only clarified the powers of the Commissioner of Income Tax. It was a grey area till now. There were doubts whether they have the powers or not. We have said they do have the powers. We have also said that there is no need for a higher authority to sign such a waiver order. This will bring greater clarity.