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Our Bureau

New Delhi , March 7

THE Finance Ministry on Monday said the Budget proposal to move from the rebate method to income-based deduction method on the income-tax front should be seen only as a transitional idea to the `exempt-exempt-tax' (EET) method, which is the best international practice relating to taxation of financial savings.

"The move to Section 80C (which would give consolidated limit of Rs 1 lakh deduction for savings) from rebate method is transitional to the EET system. A committee would be set up for working out the roadmap for moving to an EET system. As a first step, the rebate system is being removed as it is not compatible with the EET system," a Finance Ministry official said at a post-Budget workshop on Monday.

The official also indicated that the Ministry may review the norm which held that the deduction up to Rs 1 lakh under Section 80C would be available only if the sum paid or deposited in the previous year is "out of income chargeable to tax."

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