The one factor that loomed large over the Budget 2003-04 exercises concerning direct taxes was in the form of the Vijay Kelkar reports.
The reports generated considerable debate and opposition from various quarters, including the BJP, which appointed a committee headed by Rajnath Singh to examine the recommendations inter alia on direct taxes.
So charged was the atmosphere and such diverse were the views on the Kelkar panel recommendations that Prime Minister Atal Bihari Vajpayee had to say that the suggestions were merely recommendatory and not binding on the government. Considerable uncertainty prevailed on the issue.
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After the presentation of the Budget, relief has dawned on a significant section of taxpayers, specially the salaried and middle income groups.
Many of the sweeping recommendations concerning them have been rejected by Finance Minister Jaswant Singh. Also, on the subjects where the panel had suggested withdrawal/discontinuance, the same have not only been retained but also improved upon.
The suggestion to withdraw standard deduction for salaried employees has been rejected. Instead, the existing outer limits of 33.33 per cent, subject to a maximum of Rs 25,000, has been increased to 40 per cent and Rs 30,000, and even people who are not at present entitled to it (their income being over Rs 5 lakh), have been given the benefit of deduction of Rs 20,000 in income computation.
The panel had suggested that tax rebate schemes under Section 88 for savings be eliminated. The same has not only been retained but education expenses up to Rs 12,000 per child for two children have been brought within the purview of this Section for the tax rebate.
The panel's recommendation was that tax rebate under Section 88B for senior citizens should be eliminated. The same has not only been continued, but the limit of rebate up to Rs 15,000 has been enhanced to Rs 20,000.
The suggestion that generalised exemption limit of Rs 50,000 be increased to Rs 1 lakh for individuals and the Hindu undivided family (HUF) has not been accepted. The same has been retained at Rs 50,000.
The suggestion to replace the three tax brackets in personal income-tax schedule by two brackets stands rejected.
The panel had recommended that income-based deduction under Section 80L for interest income should be eliminated. The same has been continued with an increased limit of Rs 3,000.
The deduction for mortgage interest in respect of loans for acquiring owner-occupied dwellings, which was recommended to be reduced from Rs 1.5 lakh to Rs 50,000, has been retained at the existing figure.
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