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North block mandarins to propose tax breaks, retro tax rollback

Saturday, 24 May 2014 - 7:15am IST | Place: New Delhi | Agency: dna

North Block – the seat of the Union finance ministry – is seeing marathon meetings, wherein top government officials are preparing representations for the new government, key among them being increasing the income tax exemption by Rs 20,000-Rs 30,000, addressing the retrogressive taxation and taking up expenditure reforms.

In their efforts, the finance ministry babus are likely to work through the weekend, before the new government under prime minister elect Narendra Modi is sworn in on Monday.

The proposals, if agreed by the new political bosses, may see the light of the day in the upcoming Budget in July.

Sources confirmed to dna that an income tax exemption of Rs 20,000- Rs 30,000 is likely to be proposed. "The idea behind the move is that the newly-elected government would like to give some reprieve to the people of the country, who have been suffering on various accounts such as high inflation. We can sustain an exemption up to Rs 30,000," said a top finance ministry official on condition of anonymity.

The other two aspects relate to the investor confidence and macro-level financial stability. A top revenue department official told dna, "Two of the issues that are being brainstormed as of now for
the representations are the retrogressive taxation affecting a slew of companies and expenditure reforms by cutting the unnecessary spend to unload the fisc and ensure a healthy fiscal deficit as well as growth numbers."

On the taxation introduced by former finance minister Pranab Mukherjee in 2012, which imposed a tax liability worth about Rs 12,000 crore, the finance ministry is likely to propose bringing in an
amendment in the finance bill, when the government introduces the budget in the first week of July.

Experts feel the move will give a very strong signal to the global investors. "The country has lost a lot of credibility after the move. If the new government takes a strong stand on these issues, it will
work as a confidence booster among the investor communities. Similarly, the government will also need to take firm action on Nokia case as well," said Rakesh Nangia, partner, Delhi-based tax
consultancy firm Nangia and Co.

Meanwhile, Vodafone too expects, that the new government to resolve the issue. Vodafone chief executive Vittorio Colao told media in London that pro-reform statements of the winning party made him optimistic that the BJP will quickly do something to restore confidence in the country. Vodafone has already filed for international arbitration last month.

The other key proposal the new government will have on its table is that of expenditure reforms. "The fiscal deficit has gone up to 6.5% levels in the last few years. We need to rationalise the expenditures and bring down the fiscal deficit to 2.5%," said the official.

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