Dr. K. U. Mada, Director, Economist and Company, Mumbai

TUNING IN PERSONAL TAXATION TO INFLATION
The Budget should tune in personal taxation in the context of raging inflation and the need for sustaining saving in the economy. Inflation essentially inflicts injury to the middle class, salaried class and middle level tax-paying individuals. One of the ways in the Indian Budgets, except for the last decade or so, is the too-frequent- change of tax rates, direct and indirect. FM should, as far as possible, avoid tinkering with changes in the rates to ensure that there is an element of stability injected into the system to facilitate planning by individuals, corporates and the rest.
The exemption limits of individuals, senior citizens and women should be raised by Rs. 20,000per year. The exemptions in recent years have been far from adequate to take care of inflationary pressures. Further, there is an immediate need to raise the 80C limit from Rs. 1 lakh to higher levels on a graduated basis. For income beyond Rs.10 lakhs, the exemption could remain at Rs.1 lakh, above Rs.20 lakhs at Rs.1.5 lakhs, above Rs.30 lakhs at Rs.2 lakhs, above Rs.40 lakhs at Rs.2.5 lakhs and above Rs.50 lakhs at Rs.3 lakhs. This would ensure a degree of equity and fairness. Also, obligations to family, community and society go higher with higher income. Having a uniform Rs.1 lakh which in the present inflationary context is far from adequate. The higher the income the higher should be the exemption limit. As one of the canons of taxation enjoins, it is a reward for earning more and paying tax.
In addition, infrastructure development is in focus and its core role in the next two decades of the Indian growth story is obvious and well-recognised. If the Government is serious about mobilizing funds through infrastructure companies, the higher amounts of investments in infrastructure bonds should be encouraged. Moreover, the entities concerned have got to meet fund-raising expenditures and the funds so raised should be a substantial part of their resources for being deployed in the infrastructure projects. As of now, the exemption limit under Section 80 CCF is restricted to Rs.20,000 irrespective of the income. It is suggested it should be linked to income at least up to Rs.50 lakhs and the amount could be on a percentage basis, say, 25% of the amount of exemption limit prescribed under Section 80 C, thereby establishing a linkage.
There is need for at least partial exemption of interest on term-deposits with scheduled banks. Income-tax reduces income from bank interest roughly by one-third; hence, at least 50% of the bank interest income should be exempt from income-tax, at least up to interest of Rs.10 lakhs, if not down the line for all tax-payers.