Vijay Kelkar Committee (2002) Recommendations on Direct Taxes

November 23, 2015 November 9, 2023

Impetus to direct tax reforms in India, came with the recommendations of the Task Force on Direct & Indirect Taxes under the chairmanship of Vijay Kelkar in 2002. The main recommendations of this task force related to the direct taxes related to increasing the income tax exemption limit, rationalization of exemptions, abolition of long term capital gains tax, abolition of wealth tax etc. Its key recommendations were as follows:

Administration of Direct Tax

The taxpayer services should be extended both in quality and quantity and taxpayers should get easy access through internet and email.
PAN (Permanent Account Number) should be expanded and it should cover all citizens.
Block assessment of search and seizure cases should be abolished.
To clear the backlog, the department should outsource the data entry work.
All returns and issue of refunds should be completed in a four month period. Dispatch of refunds should be outsourced.
Government should establish a Tax Information Network to modernize, simplify and rationalize tax collection, particular TDS and TCS.
Abolish the requirement of Tax Clearance Certificate on leaving the country.
Empower CBDT with appropriate administrative and financial powers.

Personal income tax

Increase in exemption limit to Rs.1 lakh for the general categories of taxpayers and further exemption for senior citizens and widows.
Rationalize income tax slabs, eliminate surcharge on personal income tax.
Incentivise home loans by providing interest subsidy on home loans @2%.
Increase deduction under Section 80CCC for contribution to pension funds.

Corporation Tax

Reduce the Corporate tax to 30% for domestic companies and 35% for foreign companies.
The listed companies should be exempted from tax on dividends and capital gains.
Increase rate of depreciation for plant and machinery.
Abolish Minimum Alternate Tax.