The Hindu Business Line : `Direct tax issues will be addressed in regular Budget'

THE Finance Ministry has said that the direct tax issues including revisiting standard deduction for salaried employees and extension of tax exemption on the long-term capital gains on listed equities acquired between March 1, 2003 and March 1, 2004 would be addressed in full in the regular Budget.

"The necessary changes in direct tax procedures mentioned in the Interim Budget would not be addressed now. They are all in the nature of agenda items for a regular Budget. But the Finance Minister has in his Interim Budget speech expressed the Government's commitment and conviction to bring about these changes," Ms Vineeta Rai, Revenue Secretary, told newspersons at the post-Budget press conference here today.

In his Interim Budget speech, the Finance Minister, Mr Jaswant Singh, said that "the regime of listed equities acquired on or after March 1, 2003 being exempt from long-term capital gains tax should be extended for a further period of three years, so as to provide stability."

The long-term capital gains exemption was announced in the Budget for 2003-04 to encourage retail investor participation in capital markets.

Besides the issue of long-term capital gains exemption and revisiting of standard deduction for salaried employees, the Finance Minister also underscored the need to extend the fiscal benefits available to new projects in the power sector to 2012, instead of 2006.

He also held that such benefits should also be available to cases of takeover from state electricity boards.

Mr Singh also underscored the need to consider a tonnage tax scheme to make Indian shipping become internationally competitive.

Citing the "hardship" faced by farmers on account of levy of tax on capital gains and accrued interest on enhanced compensation, when their agricultural land is acquired by the government, Mr Singh said that the "government believes that capital gains on such acquisition should be exempt from tax".

He also said that there should be no deduction of tax at source on the interest earned on enhanced compensation for acquisition of such land.