Withdrawal of benefit to senior citizens u/s 88B has been justified on the ground that they would be entitled to tax rebate for medical expenses up to Rs 4000.
Here again a view has been taken without appreciating the problems of aged persons. Senior citizens are required to incur expenditure within their limited incomes not only on medical treatment but also on conveyance, housing, domestic help etc.
In the absence of any governmental schemes to assist persons who have given their best years to the country. Withdrawal of this meagre benefit seems harsh and unjust.
In this context the observations of FM in para 136 of his budget speech for the year 2000 should have been given due weight.
The FM had said: "As an expression of our gratitude to the contribution made by senior citizens during their active years and keeping in view the possible hardship that they face in advanced years of their life, I propose to raise the tax rebate available to them from Rs 10000 to Rs 15000".
No convincing grounds have been given why dividend income exceeding Rs 2500 should also be exempted when it was made taxable only last year after being exempted by Shri Chidambaram. The Panel has given no weight to the attribute of 'stability' in tax policy. This would benefit only higher income group taxpayers.
Section 36(iii) provides for deduction of interest paid in respect of capital borrowed for the purpose of business or profession. There is no rationalising in discontinuing this deduction when it is incurred for the purposes of earning income more so when it can alternatively be claimed u/s 37(I) as expenditure incurred wholly and exclusively for business. But then the issue is as to why make the change at all !
In one sweep the task force has suggested removal of practically all exemption and incentive provisions which are in the IT Act since years ignoring the position that in the present days, taxes are not merely a source of revenue to the states.
Direct taxes serve several functions in addition to financing federal government expenditure. These tend to
allocate resources, encourage or discourage certain kinds of economic and social behaviour, redistribute income and wealth, stimulate and stabilise economic growth and help even in solving certain specific economic and social problems such as checking of pollution, shortage of living accommodation, encouragement to education, providing help concerning weaker and handicapped sections of society and many other such objectives through the mechanism of tax incentives.
Thus starting from the necessity of collecting revenues for the government to meet its expenditure, taxation has developed into an instrument of promoting social and economic growth, stability an efficiency and has become a major device with the governments to implement their political thinking and secure the participation of masses in its policies and progress. An
effectively administered tax system in the hands of the government becomes a major weapon against many odds.
Should all such objectives be put aside for making the system simple or whether with such provisions too, the tax system can be made simple was perhaps the more important issue that should have attracted the Task Force's attention.
In a seminar on 'India's tax competitiveness' organised by Ficci on 13 November, Dr Steven Clark, Head of the Tax Policy and statistics unit in Centre for Tax Policy and Administration France in his presentation emphasised that for supporting economic performance of a nation, savings amongst others, are imperative.
But the Task Force has suggested removal of all tax incentives that promote savings.
This recommendation is obviously against the country's interest & growth in GDP, which has been fixed at 8 per cent in the 10th Five-Year Plan..
