30. Mr.

Speaker, Sir, my edifice of Direct Tax proposals rests on four pillars of

stability, economic growth, rationalisation and simplification.

131. Our existing rates of personal taxation at 10%, 20% and 30% are only three in
number and quite moderate. Although the basic exemption limit is Rs.50,000, the
real exemption limit goes much higher when the other exemptions and deductions are
taken into account. For example, salaried persons start paying tax only on crossing
Rs.75,000 per year because of the standard deduction. If the tax rebates and
deductions available for savings are taken into account, the effective limit of
exemption gets close to Rs.1 lakh. Thus I feel that the present rates of taxation
as well as the exemption limit are reasonable. I, therefore, propose to maintain
them at the same levels.

132. Although the 10% surcharge imposed last year was meant to be temporary, I am
constrained to continue with it, in view of the heavy and unexpected expenditure
burden, mainly on account of defence requirements and transfer to states mandated
by the Finance Commission.

133. Having restrained myself from imposing any additional taxes during the course
of the year when there was much talk of a Kargil tax, I now propose increasing the
surcharge moderately from 10% to 15% on non-corporate tax payers having total
taxable income above Rs.1,50,000 per year. This will slightly increase their
marginal rate from 33% to 34.5%. I trust that these relatively better-off sections
of society would bear this additional burden cheerfully.

134. Lest it is felt that I am being discriminatory in not increasing the surcharge
on corporates, let me clarify that they would also get their opportunity to
contribute to the national effort in other ways a little later.

135. Despite the financial constraints, I would like to propose some positive
measures on personal taxation.

136. As an expression of our gratitude to the contribution made by senior citizens

during their active years and taking into account the possible hardships that they
face in the advanced years of their life, I propose to raise the tax rebate
available to them from Rs.10,000 to Rs.15,000. At the marginal tax rate of 30%,
this translates into an exemption of an additional Rs.15,000 from their gross
income, or substitutes the need to save an additional Rs.25,000 to avail of a
similar exemption under section 88.

137. I have always maintained that despite all challenges, my job as Finance
Minister in making a budget is easier than that of an average house-wife struggling
to balance the family budget. As a token of appreciation and recognition of women
as productive contributors to the economy, I propose an additional rebate of
Rs.5,000 for women tax-payers from their tax liability. This would be subject to
the overall ceiling of Rs.15,000 if they also h