Direct Taxes
- Simplify personal income tax by having two basic rates instead of the existing three:
- Nil tax rate for personal income of up to Rs 1 lakh per year
- 20% for income of Rs 1 lakh-Rs 4 lakh
- For income over Rs 4 lakh, a tax of Rs 60,000 plus 30 per cent on the portion of income over Rs 4 lakh
New Tax Rregime
- Introduce value-added tax regime across the country and discontinue all the other local taxes
- Levy service tax in a comprehensive manner leaving out only a few services by including them in a negative list; enhance the rate to achieve parity with Cenvat by 2006-07
Exemptions & Deductions
- Most direct way to raise tax-to-GDP ratio is by removing the plethora of exemptions granted on import and excise taxes, mostly for non-economic considerations
- Abolish all tax deductions under 80L & rebates under 88, 88B; even tax rebate for women taxpayers under 65 years (section 88C) may be eliminated
- Remove exemptions on interest income received from bonds, securities and debentures under Section 10
Agricultural Tax
- Pressurise all states to pass a resolution under Article 252 of the constitution authorising the Centre to impose tax on agricultural income
Indirect Taxes
- Change existing laws so that the levy of excise duty is progressively based upon value addition and applied only to the processing stage (of manufactured goods)
- Expand the existing system of mrp- (maximum retail price) based valuation to other products and sectors
- Amend Cenvat rules to abolish the distinction between capital goods and inputs and allow credit on all inputs brought into the factory with minor exceptions
- Have only three types of customs duties — basic, additional or countervailing and anti-dumping (or safeguard)
Corporate Tax
- Abolish MAT (minimum alternate tax) imposed on corporates and reduce corporate tax from 36.75 to 30 per cent for domestic companies and from 48 to 35 per cent for foreign companies
- No tax on dividend income and long term capital gains tax to be applicable only on listed equity shares
Housing Loans
- In case of housing loans, the deductions available up to Rs 1.5 lakh to continue but either reduce the amount of interest deductible from income to Rs 50,000 lakh only, or only give a 2 per cent interest subsidy from nhb on all loans below Rs 5 lakh
Compliance & Transparency
- Improve taxpayers’ compliance by reducing transaction costs for industry by 50 per cent and inducting transparency and simplicity that will lead to lesser disputes and litigation
- Introduce a trust-based system in the area of customs duties that acts like a universal green channel and is uniformly applied to all importers and exporters and all goods
- Amend existing rules so that arrests in excise cases are made only with the sanction of a magistrate
Axing Taxes
- Abolish wealth tax, which anyway doesn’t yield any major revenues to the central government
