The Indian Budget 1996-97 The Indian Economy Overview


[Index] [Prev] [Next] [Page 13]

Taxation [1]

Speech of
Shri P. Chidambaram
Minister of Finance
22nd July, 1996

  1. Now, I turn to my tax proposals.

  2. The good news is there are no new direct taxes save one and even that solitary new tax, I am confident, will be almost universally welcomed.

  3. There are pressing demands from all sections of society to raise the threshold limit for personal income-tax from the existing level of Rs.40,000 to at least Rs.60,000. Each increase of Rs.1,000 in the threshold limit will cost the exchequer Rs.150 crore and, since 77.5% of this loss will be borne by the States, any major concession on this front will put a severe strain on the States' financial resources. Besides, when the direct tax base is already narrow - only 110 lakh persons pay income-tax - no Finance Minister can afford to let 20 or 30 lakhs of them go out of the net. However, I accept the need to provide relief to the assessees in the first tax bracket, especially the salaried class. I propose to do so in two ways: first, I propose to reduce the income-tax rate for the first bracket from 20 per cent to 15 per cent. This benefit will be available to all assessees. I also propose to raise the standard deduction from Rs.15,000 to Rs.18,000 for salaried employees having an income upto Rs.60,000. Thus, a salaried employee with an income of Rs.60,000 per year, making the minimum contribution to his provident fund, will now pay no tax at all. If he has no savings, he will still pay only Rs.300.

  4. We owe a special consideration to our senior citizens. At present, senior citizens benefit from a special tax rebate of 40% upto an income level of Rs.100,000. I propose to raise this to Rs.120,000.

  5. House-owners, residing in their own houses that have been financed by borrowing, deserve relief. The deduction of interest payments of Rs.10,000 allowed to them from their income from property is proposed to be raised to Rs.15,000.

  6. As another relief measure, I propose to raise the limit under section 80D of the Income-tax Act for deduction in respect of insurance on the health of the individual and his family members from Rs.6,000 to Rs.10,000.

  7. I have already mentioned the new scheme of personal-cum- family pension being introduced by LIC. In order to encourage savings in this form, I propose to allow the contribution to the pension fund to be deducted from taxable income upto a limit of Rs.10,000 per annum. I also propose to exempt the income of such a pension fund in the LIC from the levy of income-tax.

  8. At present, a five year tax holiday is available under section 80-IA to enterprises engaged in developing, maintaining and operating infrastructure facilities such as roads, highways, bridges, new airports, ports and rail systems. I propose to extend this incentive to investment in irrigation, water supply, sanitation and sewerage systems.

  9. I also propose to provide a five year tax holiday under section 80-IA of the Income Tax Act to companies exclusively created to participate in research and development activities. I am also simplifying the existing procedure for giving weighted deduction under section 35(2AA) of the Income-tax Act on sums paid for scientific research to a National Laboratory or a University or an Indian Institute of Technology by deleting the condition of approval by an outside body.
[Top of Page] [Index] [Prev] [Next]

SiteMap Upcoming Content Useful Tools People behind IEO Feedback / Comments Copyright 1996 MediaWeb India, except where otherwise noted.

Our Sponsors | Advertising Rates | About this Site | MediaWeb Services