Task Force on Direct Taxes was set up under the chairmanship of shri Vjjay L. Kelkar, to recommend measures for simplification and rationalisation of the taxes. Major recommendations were as follows. Tax Administration
i. Expansion of taxpayer services both qualitatively and quantitatively. Easy access to taxpayers through internet and e-mail and extension of facilities such as Tele-filing and Tele-refunds.
ii. Extension of PAN to cover all economic agents/citizens.
iii. Processing of all returns and issue of refunds within four months.
iv. Introduction of transparency and objectivity in the process of selection of cases.
v. Establishment of a Tax Information Network on a build, operate and transfer basis to speed up the process of modernisation and consequent simplification and rationalisation of the scheme of tax deduction at source.
vi. Abolition of the requirement of obtaining a tax clearance certificate before leaving the country. Restriction of this requirement to proclaimed offenders.
vii. Enhance accountability of officers and staff.
viii. Empowering CBDT with appropriate administrative and financial powers.
ix. Personal Income Tax
x. Increase in exemption limit to Rs 1 Lakh for the general category of taxpayers. A higher exemption limit of Rs 1.50 lakh for widows and senior citizens.
xi. Introduction of a two rate personal income tax schedule – 20 percent up to an income of Rs 4 Lakh and 30 percent for income exceeding Rs 4 Lakh. Elimination of surcharge on personal income tax.
xii. Elimination of standard deduction
xiii. A tax rental agreement whereby states would authorise the Central Government to impose income tax on agricultural income and assign the proceeds to states.
xiv. Elimination of tax incentives under section 88, 80L, and interest income under section 10.
xv. Reduction in corporate tax rate to 30 percent for domestic companies. Foreign companies to be taxed at 35%. Exemption from tax on dividends and capital gains from listed equity.
xvi. The general rate of depreciation for plant and machinery to be reduced to 15 percent from the existing level of 25 percent.
xvii. Elimination of minimum alternate tax.
xviii. Removal of exemption under section 33A B, 33AC, 33B, 35, 35AC, 35CCA etc.
xix. Income of mutual funds derived from short term capital gains and interest to be taxed at a flat rate in the hands of the mutual funds.
xx. Abilition of wealth tax.