New Delhi, Dec 4 (IBNS) Raise personal income tax exemption limit to Rs 3 lakh, reduce service tax and excise tax to eight per cent from 12 per cent and increase deduction of interest on housing loan to 5 lakh to revive consumer demand and boost investment, ASSOCHAM said in its pre-Budget recommendations to the government.
The effective rate of corporate tax should also be brought down to 25 per cent from 32.45 per cent at present.
"The base exemption limit of resident individual below the age of 60 years should be increased to Rs 3 lakh, to incentivize people to come into the tax net , ensure higher collection from greater compliance and encourage consumption and savings," reveals the ASSOCHAM pre-Budget memorandum for 2013-14.
The Pre-Budget memorandum for 2013-14 was jointly released by President R N Dhoot, Chairman & Co-Chairman of taxes council Ved Jain and J K Mittal respectively and Secretary General ASSOCHAM D S Rawat.
The excise duty and service tax rates were increased in the last two Union Budgets from 8 per cent to 12 per cent.
Meanwhile the industrial growth has significantly fallen and due to low capital investment and high inflation, the demand for indigenous goods and services has been affected adversely.
"It is therefore, recommended that the excise duty and service tax rates should be restored to the earlier level of eight per cent prevailing two years ago," the memorandum said.
Dhoot said it was essential to revise the rate of depreciation on plant and machinery back to 25% from the existing level of 15% in view of the technologies.
It said the tax base for goods and services has already expanded to generate high revenue and the government can selectively increase customs duty rates to neutralize the effect of lower tax rate of excise duty and service tax.
Besides, by increasing customs rates, the government should protect the domestic industry from unfair competition from countries like China. There are cases where goods are being sold in the global market below production cost in highly competitive markets abroad, said the chamber.
At present, the limit of deduction of interest on housing loan is Rs 1.50 lakh per annum.
This should be increased to Rs 5 lakh to boost the housing sector as also give relief to middle class families, said ASSOCHAM.
Moreover, to encourage investments in infrastructure during the 12th plan period, the deduction under 801A(4) "profit linked incentives in form of 100% deduction of income in SEZ development" must be continued, said the chamber chief.
Moreover, with a view to have a level playing field and removal of such levies in the proposed Direct Tax Code (DTC), the additional levy of tax by way of surcharge and education cesses should be removed on corporate assesses and similarly education cess on non-corporate assesses.
The surcharges, including the education cess were levied as a temporary measure.
Further justifying the demand for tax reduction rates, at a time when the global economy is passing through tough times, "the Indian industry is facing competitive disadvantages due to complex multi-layered tax indirect tax structure having cascading effect on cost, high compliance cost and prolonged tax litigation".
Another significant recommendation in the pre-budget memorandum submitted to Union Finance Minister P Chidambaram relates to tax re-assessment in a blanket manner under Section 147/148 of the Income Tax Act on matters already examined.
"In recent times, tax reopening notices under Sections 147/148 have become a very common occurrence and such notices are being served in thousands across the country. Simple audit observations, even on points of law are frequently being used as grounds for re-opening leading to extreme harassment of all assesses.
"The position has become so bad that even for legislations which have become obsolete, like Inter Tax Act, reopening are being done for very old years since the relevant law permitted reopening without any time limit," said the chamber
It said the reopening provisions are being misused in various locations, especially for salaried assesses, where scrutiny assessment is not possible as per the CBDT guidelines.
"This has become a breeding ground for corruption and harassment," the document said.