Indian Budget 2005-06 - Spare the middle-class!

The Honourable FM of India is likely to adopt good measure of Mr Vijay Kelkar's Direct Tax reforms committee recommendation in 2005-06 Union Budget. Reco to remove plethora of exemptions&rebate, thus simplify tax code is welcome. Matching widening of tax-slabs, reduction of tax rates however may not happen, strictly going by Kelkar recommendations.

Given the fact that..
- Mr Kelkar's reco were revenue neutral & DOES NOT take into account potential of increased collection due simplification & widening of tax net. Part of this benefit needs to be given to the most honest tax payer, the Individual Income Tax payer.

- majority Individual tax contributors are from Urban centres and considering real-cost of living, proposed removal of exemptions in the interest of welcome & needed simplicity of tax code, the 20% taxable income slab needs to be raised to 5 lakhs from 4 lakhs.

- the Individual Income Tax's maximum tax rate should be brought down to 25% from 30% considering the fact that the GST(VAT) will progressively be increased upto 20%, besides widening the items coming under GST. Whereas today, only fewer of these essential & consumer items attracts lower service/State tax rate of 8-12%.

- Lower and reasonable tax-rate (25%) commensurate with the Service & its quality provided (which incidentally is not compared by Kelkar's committee, though they dont forget to quote Denmark, Canada for their 40% Income tax rates, as againast proposed India's 30%) should only improve compliance & hence enhance revenue. Such enhanced revenue mobilisations could then be used to fund 'reponsible' & much needed poverty alleviation programmes that DONOT duplicate and work in cross purposes!

Refer to analysis of key recommendation of Mr Vijay Kelkar committee and whats good and how rest is going to hurt middle-class:
http://www.mouthshut.com/review/Ministry_Of_Finance-58330-1.html
Indian Budgets 2005 - Surprises for middle-class?