In a marginal relief to middle class, Finance Minister P Chidambaram on Thursday exempted income up to Rs 111,250 from tax, sacrificing Rs 300 crore, and deferred till April one next year the proposal to withdraw the tax exemption on aircraft leasing and interest on NRI deposits.
This is part of 55 official amendments incorporated in the Finance Bill, which was passed in the Lok Sabha without discussion amidst an opposition boycott, capping bitter government-opposition relationship that has marred most of the budget session.
The relief to income tax payers is expected to cost the exchequer Rs 300 crore in a full year. This is besides the loss in revenue of Rs 1,700 crore as a resutlt of the budget measure to exempt income up to Rs 100,000 from income tax.
The Budget had originally proposed tax exemption up to Rs 100,000 and this had resulted in an anomalous situation wherein those having marginally higher income beyond Rs 100,000 would have to pay huge tax up to Rs 9,000 resulting in real income, much less than those having an income of Rs 100,000.
To correct this anomaly, the government has decided to provide tax rebate under section 88D of the Income Tax Act for those having taxable income between Rs 100,000 and Rs 111,250 so that their real income is not less than Rs 100,000 after tax.
Finance Minister P Chidambaram moved 55 official amendments to the Bill which among other things now seeks to take out of the tax net those with incomes marginally above Rs 100,000 as originally proposed in the Budget.
Now assessees whose taxable income is up to Rs 111,250 would get the benefit, Chidambaram told reporters later when asked what constituted the term 'marginal' for providing relief.
This has been necessitated as persons with income up to 100,000 have been exempted from income tax, while those beyond Rs 100,000 would have to pay tax on their income above Rs 50,000 onwards resulting in an anomalous situation.
Under the original budget proposal, the real income of a person earning Rs 110,000 would be much less than those earning up to Rs 100,000.
Voicing his 'unhappiness' over the Finance Bill being passed without a debate, he said he has broadly addressed the concerns expressed in various quarters regarding the tax proposals in the Finance Bill.
By one of the amendments the provision regarding tax on Non-Resident Indian and Non-Resident External deposits has been deferred till April, 2005 and would be taken up after widest consultations as part of the efforts to debate Kelkar panel recommendations.
Giving details of the amendments after the passage of the Bill, the finance minister said he had also removed certain 'ambiguity' in the definition of 'relative' and unrelated persons for benefits under the Gift Tax provisions.
There was certain confusion on the filing of Annual Information Report by income tax assessees, which would be only for very high value transactions to be defined shortly.
Amendment has been brought in this regard as well, he said adding through another amendment the panel provision under section 227 (A) for falsification of book of accounts have been lifted.
Regarding tax on NRI and NRE deposits, Chidambaram said it had been deferred till April, 2005. The provision remains and would be taken up after widest consultations as part of the efforts to debate Kelkar panel recommendations.
Also the provision to tax leasing of aircraft has been deferred till April 2005, he said, adding that this has been done following the request from the Civil Aviation Minister Praful Patel even though most of the leasing of aircraft by Indian Airlines, Air-India and private airlines had already been done.
He said amendments have also been made to incorporate the changes announced in the Securities transactions tax.
Chidambaram has modified the securities transaction rates and exempted the day traders from it while replying to budget debate in Lok Sabha last month.
Chidambaram also said he was 'disappointed' that the Appropriation and Finance Bills have been passed without discussion. "I am not happy," he said, adding, "Finance Bill should be debated on the floor of the House and replied to on floor of the House."
Like the demands for grants to the tune of over Rs 40 trillion on Wednesday, the Bill, giving effect to the direct and indirect tax proposals, was passed on Thursday without any discussion, reflecting the current tensions between the government and the opposition. With this, the House has completed the three-stage budgetary exercise.
A visibly upset Speaker Somnath Chatterjee said it was not a happy occasion that the Bill and the demands for grants had been voted without any discussion. He was unhappy the Opposition was not present in the House.
Also, like the first session after the Lok Sabha elections, the two-phased budget session has also been largely disrupted with the Opposition taking up various issues targetting the government mainly on the 'tainted' ministers.
The Veer Savarkar and the Uma Bharti issues only provided more grist to the BJP-led Opposition's mill.