Economists today proposed that higher income tax rate for the rich be announced in the Budget for 2013-14 in line with the principle of progressive taxation, according to an official statement today.

"Another suggestion included following of principle of progressivity i.e. higher tax rates for high-income group," the release said, talking about pre-Budget consultations of economists with Finance Minister P Chidambaram and his team here.

Recently, Prime Minister's Economic Advisory Council chairman Rangarajan had pitched for surcharge on income tax for super rich.

"...One need not disturb the structure of income tax system as it is now. But add a surcharge for income above particular level. I believe as we go along, we need to raise more revenues and the people with larger incomes must be willing to contribute more," he had said at a seminar.

In the pre-Budget consultation, economists came out with various suggestions, including reversing a low investment cycle, imposing inheritance tax and maintaining certainty in tax laws.

Inheritance tax was done away with by then Finance Minister VP Singh in 1980s. Certainty of tax laws assumes importance after the government drew flak from the Budget proposals of retrospective amendments to the Income Tax Act and the General Anti-Avoidance Rules.

The government had appointed a committee under tax expert Parthasarathi Shome to look into the issues. His report is lying with the Prime Minister's Office.

They also pitched for widening of tax base and effective enforcement of tax laws to penalise those who hide their income and pay less tax as well as those who despite high income do not pay any tax at all.

Economists also proposed setting up of an Asset Management Office especially to manage the government urban land in various metro, two tier and three tier cities.

Some economists suggested pursuing reforms at regular intervals to keep the market sentiments high.

Another proposal was to put Basel III reforms on hold for a year keeping in view the current economic situation, the statement by the Finance Ministry said.

One of the suggestions was to give incentives to boost small savings schemes as savings under these schemes have gone down by 5% over the years.

Some economists also called for shifting the pre-Budget consultation process to October when the Budget making process starts.

Some economists recommended for quick action to bring inflation down to the level of 4-5% at the earliest, higher investment in health & education sector, higher capital expenditure on agriculture etc.

Chidambaram said difficult phase is over for the economy and now focus would be on achieving higher growth during the year.

The economic and political developments in the Euro zone area and the United States had its impact on the world economy including our economy.

However, a slew of reform measures taken by the government had a positive impact on the market sentiments, he said.

He said that resolution of ‘fiscal cliff’ in US recently too had a positive impact on the market sentiments worldwide including India.

Chidambaram said that direct tax collections are satisfactory, while indirect taxes including excise duty are falling short of expectations.

Those who participated in the pre-Budget consultation included Nitin Desai, Omkar Goswami of CERG Advisory, former FICCI Secretary General Rajiv Kumar, Pulin Nayak of Delhi School of Economics, Surjit Bhalla of OXUS Research and Investments, he said.