Finance Minister P Chidambaram favoured a close hard look at tax exemptions in a bid to bring fiscal prudence.

"A close hard look at the present system of exemption in favour of particular sections of taxpayers was absolutely essentials," he told the Parliamentary Consultative Committee attached to his ministry.

Along with his budget this year, a paper presented by him indicated that various tax exemptions and incentives cost the exchequer Rs 1,58,000 crore.

Pruning of tax incentives was equally important to mmet the Fiscal Responsibility and Budget Management targets.

As per FRBM targets, revenue deficit is to be wiped out by 2009 by cutting it by 0.5 per cent of GDP every year.

Likewise, fiscal deficit is to be brought down to 3 per cent of GDP by 2009 by cutting it 0.3 per cent of GDP every year.

"Every tax concession is introduced with a specific purpose," he said, and added it needed to be reviewed on a periodic basis with a goal to improve fairness, transparency and efficiency of the tax system.

This would also help in meeting the priorities of the government and eliminate inefficient and inappropriate tax expenditures, he added.

An equitable tax structure will help in generating adequate resources to fund spending on social and physical infrastructure, the Finance Minister said.