I-T dept wants standard deduction back

The salaried class will stand to gain if the suggestion by the income-tax department is accepted by Finance Minister P Chidambaram in the forthcoming Finance Budget 2007.

The I-T department is in favour of re-introducing standard deduction for the salaried class withdrawn by Chidambaram in the 2005 Budget.

"In our Budget suggestion to the finance ministry we have suggested that the standard deduction withdrawn from the 2004-05 financial year should be re-introduced," a senior official with the I-T West Bengal zonal office said. "We have forwarded our suggestion to the finance ministry through the Central Board of Direct Taxes," the official added.

The department said the salaried class was at a disadvantage compared to corporate entities. "Standard deduction was given as a lump sum benefit toward cost to earn income. But, after the tax exemption ceiling on investment was raised to Rs 1 lakh this year was abolished," the source said.

The Rs 1 lakh investment ceiling has certain advantages for business firms and corporate entities like depreciation of vehicles and cost of hiring a driver, the official said.

The standard deduction slab was Rs 30,000 for total income for the salaried class under Rs 5 lakh per annum and Rs 20,000 for income over Rs 5 lakh.

Meanwhile, the West Bengal I-T circle has collected Rs 2,972 crore net corporation tax during the first seven months (April-October) of the current financial year ended October 2006. This is a 36 per cent rise over the corresponding period when the department collected Rs 2,186 crore as corporation tax.

Personal tax collection during the period was Rs 1,124 crore, just 9 per cent higher over the corresponding period. "We are planning to look into why personal income tax growth is low," I-T commissioner G Choudhuri said.

"We are targeting a total tax collection of Rs 9,900 crore in the 2006-07 financial year," he added. The total tax collection till October 2006-07 was Rs 4,096 crore.