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Hema Ramakrishnan

NEW DELHI, April 16

UNDER pressure from within the Bharatiya Janata Party (BJP), the Finance Minister, Mr Yashwant Sinha, is understood to have given the go-ahead to roll-back the Budget proposal on pruning tax rebates on investments in designated savings instruments.

Close to 3 lakh assessees, with a gross income between Rs 1.5 lakh and Rs 5 lakh, will gain from the move as they are set to get the existing 20 per cent tax rebate under Section 88 of the Income-Tax Act 1961 on their investments in instruments such as National Savings Certificate and LIC premiums.

Another crucial Budget proposal to tax dividends in the hands of the shareholders is likely to undergo modifications instead of being dropped, said a senior Government official.

The roll-back on the Section 88 proposal is expected to be announced when Mr Sinha moves the official amendments to the Finance Bill 2002 which is tentatively scheduled to be taken up for consideration in Lok Sabha on April 29 and 30.

The Revenue Department has initiated the process of drafting official amendments to the Finance Bill 2002 based on Mr Sinha's directives. The formal seal of approval to the amendments is set to be given by Mr Sinha after he returns from Washington on April 22, said sources.

While different permutations and combinations were being considered during a review of the tax rebate under Section 88, a majority view was that it would be prudent to completely roll-back the proposed 10 per cent reduction in tax rebate for assessees having a gross income between Rs 1.5 lakh and Rs 5 lakh.

The rebate under Section 88 is, however, set to be knocked off completely for assessees with a gross income of over Rs 5 lakh. "The general view was that it would be cumbersome to further spilt the slabs and the corresponding rebates under each slab," said sources. The economic slowdown may be cited as the reason for maintaining status-quo on the 20 per cent tax rebate available under Section 88 to middle income groups," said officials.

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