BJP against removal of tax sops

Bharatiya Janata Party on Tuesday rejected the Kelkar panel proposal for lifting tax sops on savings, housing loans and agricultural income saying it was against the interest of vulnerable sections of society.

"I made a simple request to the finance minister. There is a need for increasing revenue, as without it there can be no rise in expenditure. But the interest of vulnerable section of the society have to be kept in mind," BJP President, M Venkaiah Naidu, who submitted the party's views to Finance Minister Jaswant Singh on Monday, told reporters in New Delhi on Tuesday.

The Rajnath Singh committee, appointed by BJP to look into the suggestions of Task Forces on Direct and Indirect taxes headed by Vijay Kelkar, opposed the abolition of tax rebates on savings as provided under Section 88, 80L and 10 of Income Tax Act.

The BJP was also against the removal of deduction in respect of interest on housing loans now at Rs 150,000, especially at a time when government has set a target of building one crore (10 million) housing units in five years.

The Rajnath Singh committee also rejected the withdrawal of tax exemptions on education loans now available under Section 80E and on medical expenses under Section 80DDB.

The report, prepared after detailed discussion with party members across the country, also said the exemptions to small scale sector and cooperatives should continue.

"BJP felt that tax policy should target at economic growth, social justice, employment generation and balanced growth between different region and judicious allocation of resources," Naidu said.

While supporting abolition of dividend tax, BJP strongly opposed the idea of imposing tax on agricultural income, saying "Time is not yet opportune to think about agricultural tax. Before that, the agricultural sector should be provided with adequate infrastructural facilities with reform measures in the sector."

However, the party said it "does not support tax evasion by the non-farmers showing their income from predominantly non-farm activities as farm income."

BJP was also against the excise duty hike on kerosene by Re one, as it would adversely affect a large number of poor.

The Kelkar panel's proposal to withdraw the standard deduction for salaried class was also opposed by the party in its eight-page report to the finance minister.

The party said exemptions enjoyed by special export zones, backward areas and infrastructure sector should continue.

The Kelkar panel's suggestion of a uniform depreciation rate under Income Tax and Companies Act was also opposed by the party as it might go against the Indian industry's endeavour to become competetive in the present globalised era.

The BJP also favoured continuing with the weighted deduction for scientific R&D under Section 35 of Income Tax Act.

The party also diluted the penalty provisions suggested by the Kelkar Task Force, saying its penalty proceedings should not be clubbed with assessment since they are of quasi-criminal in nature.

While welcoming the reform measures to raise income tax exemption limit, modernisation of tax administration and special rebates for senior citizens and widows, BJP recommended faster recovery of tax arrears and modification of one-by-six scheme for assessing income tax.

The Rajnath committee report said essential products including edible oils should be exempted from tax. 

Stating that the one-by-six scheme has been successful in widening the tax base, the party said, "This may, further, be
modified and implemented more vigorously."

It also pitched for a special tax-free savings scheme for senior citizens and an attractive social security scheme for
the people in the unorganised sector.

Proposing a "flexible tax policy", the party said the lowering of tax slabs, under excise and customs duties are
steps in the right directions but the government needs to divide both raw materials and finished products into "merit
and non-merit" items and tax them differently.

It also favoured re-introduction of investment allowance and 100 per cent depreciation for infrastructure sector.

To prevent capital flight, the party said "over-invoicing of exports and under-invoicing of imports should be contained
in order to stop capital flight from the country."

BJP also pointed to revenue leakages due to the Double Tax Avoidance Treaties that India has with many countries and
said "it should be implemented with true spirit, without enabling the third country investors to take undue advantage."