(1) Kelkar Committee has done an excellent job by recommending deletion of standard deduction, deductions and rebates under sections 88B and 88C of Income Tax Act. The Committee should have given figures of economic condition of the nation and should have given figures of interest payment of liabilities which has increased from Rs.19,664 crores in year 1990-91 to Rs.1,25,000 crores in year 2003-2004 (estimated). The Committee should have given figures of Pay, Pension and subsidies and should have pointed out that the Central government is not able to meet expenses of Interest Payment, Defence, Pay, Pension, Subsidies and Grants has to borrow monies to meet non-plan expenditure and plan expenditure are entirely from borrowed figures. Only one figure is sufficient to justify deletion of Standard Deduction in the Salary, deductions and rebates namely that from 1990-91 to 2002-2003. There is shortage of revenue receipts as follows to meet non-plan expenses as stated above:

The Central Government could not carry out non-plan expenditure, namely; Interest payment, defence, pay, pension, subsidies and grants from revenue receipts of Rs.2,45,105 crores and had to borrow Rs.95,377 crores to meet expenditure of Rs.3,40,482 and the plan expenditure was from the borrowed funds.

NO VISION TO INCREASE THE REVENUE RECEIPTS :

(2) The Committee had no vision to increase Revenue Receipts, which can be seen by following paragraphs 1.9 and 1.10 of the Report (page 3 of the Report).

"Our proposals achieve overall revenue neutrality, and enhance buoyancy by widening the personal and corporate income tax bases. This is sought to be done by reducing tax rates, pruning tax exemptions, aligning taxable profits with book profits and improving compliance."

"Our proposals completely eliminate the dividend tax, and long term capital gains tax on listed equities in the hands of the investors. These have been recommended with the express purpose of reducing the exorbitant cost of equity capital in our country. These gains or benefits accrue entirely to individual shareholders."

"Further, we have recommended that all individuals with an annual income below Rs.1 lac will be fully exempted from income tax. This also helps reduce the tax burden on individuals, and particularly low-income groups. Currently, with per-capita income in the country at about Rs.25,000 per year, our proposal implies that an "average" family of four would not pay any income tax and thus meet their needs better."

NO VISION TO BRING MORE ASSESSEE IN TAX NET :

(3) Unfortunately, the Committee has recommended exemption limit for individuals of Rs.1 lac. The Committee has given figures of 2 crores 30 lacs, who have filed income return. With higher limit of one lac, the number of assessee will be less and there can be loss of Rs.10,000 crores in revenue receipts. The Committee should have recommended exemption limit of income tax at Rs.60,000/- and Rs.1,20,000/- for senior citizen and widow, thereby 5 crores people can be brought within tax net on deletion of standard deduction, deductions and rebates of I. T. Act.

(4) The Committee should have recommended 10% tax rate for Rs.60,000 to Rs.1,50,000 income, 20% of tax-rate for income from Rs.1,51,000 to Rs.5,00,000 and 30% rate of tax for more than Rs.5,00,000 (instead of 20% and 30% tax-rate with exemption limit of income at one lac) with pension scheme as suggested in the book.

(5) If black money is to be eliminated, the Committee should have recommended that an assessee should pay tax on dividends. In U.S.A., the company writes a letter informing the assessee, the number of shares he holds and dividend he has received and tax he has paid. One copy of the said letter is forwarded through social security to I.T.O. and tax department entirely knows the investment of individual assessee and interest dividend he receives and thereby the Government is able to receive 92% of total tax revenue as the Department is able to know entire holding of assessee. In India, it can be done also with help of computer system and by introducing Part IV & V of Income Tax Rules, 1976.
(6) The Committee had no intention to increase net tax G.D.P. ratio which is lowest in India about 7.2% comparing to other nations. The chart is given of tax G.D.P. ratio of the other nations-Refer to charts. The Committee had observed paras 1.8 and 1.13.

Para 1.8 "This also means that the entire middle class" will benefit from our proposals. It is estimated that the personal tax burden for the existing tax payers will be reduced by as much as Rs.7,900 crores per annum."

Para 1.13 Thus, our tax proposals aimed at reducing the tax burden, lowering transaction costs and promoting transparency, are individual taxpayer-friendly proposals. With the consequent downward reduction in the compliance costs by even 10 percent, individual taxpayers will have further gains of Rs.4,000 crores per annum.

The Committee should have started with 10% rate of tax and exemption limit of Rs.60,000/- with other proposals deleting all exemptions, 6 crore people can be brought into tax net.