Ahead of the Budget, Ficci on Friday made a strong pitch for reduction in income tax rate both for individuals and corporates. Making a case for reduction, the chamber said the direct tax rates should also be brought down like import duties which were being aligned with Asean rates.
The higher rate for income tax in Asean is 28%. The effective rate in India is over 33% including surcharge and education cess. The government should cut the corporate tax rate by 5% to 25% which will bring the effective rate to 28% with surcharge and cess, Ficci Secretary General Amit Mitra said. Even for individual tax payers, the government should raise the exemption limit to Rs 1.5 lakh from existing Rs 1 lakh and push the slab upwards, he said. This, he said would enhance the tax base.
In a bid to tame inflation, the government which has already reduced custom duties on certain products may bring down the peak rate from 12.5% to 7.5% or 8% in the Budget. Observing that lowering import duties across the board will not help in containing inflation, he said the government needs to evaluate the impact created by the January cut and reduce duties only where it may be necessary.
He also said the government must in fact now cut the median rate of excise from 16% to 14%. This would be a step forward for introducing a goods and service tax by 2010 and will also bring down the prices of many items.