Budget may not offer tax payer much

MUMBAI: Economic reforms in the past decade have led to lower income tax rates in India, but the maximum effective rate of 31.5 per cent still manages to bite off nearly one-third of a tax-payer''s monthly cheque.
But given that a global survey of personal tax rates shows the Indian tax-payer is not too badly off, he or she is unlikely to be given more direct relief in Jaswant Singh''s first Budget.
Only two countries -- Singapore and Malayasia --have a maximum tax rate that is higher than India''s, and that too by a marginal two per cent (see table). Therefore, senior tax officials are of the view that the maximum rate will remain unchanged. As for basic exemption limits, the level of income below which people do not have to pay any tax, India scores the second lowest after Malaysia,which allows ample room for increasing this exemption limit.
Both these global trends corroborate the findings of the Vijay Kelkar-led task force on direct taxes which has recommended to the finance minister that the basic exemption limit be raised from the current Rs 50,000 to Rs 1 lakh wihout tinkering with the maximum marginal tax rate of 30 per cent.
However, the only relief for middle-class tax-payers will come from the removal of the five per cent surcharge, imposed in 2002 after the Kargil skirmishes with Pakistan, reducing the maximum effective rate to 30 per cent from 31.5 per cent.