The Vijay Kelkar panel on tax reforms on Friday proposed doubling of the tax exemption limit on personal incomes to Rs 1,00,000.
In its report on direct taxes, the taskforce headed by the advisor to the finance minister also recommended reduction in rebate on interest payment on housing loans from Rs 150,000 to Rs 50,000.
The panel also recommended that dividends from domestic companies should be exempt from taxes and long-term capital gains on listed shares should also be fully exempt.
Kelkar also recommended a 2 percent interest subsidy on housing loans up to Rs 500,000.
Kelkar also suggested the dismantling of dividend tax.
The panel recommended removal of long-term capital gains tax on shares of listed companies.
For pensioners, the panel suggested benefits like doubling the investment limit for tax rebate of 20 per cent to Rs 20,000 from Rs 10,000.
While retaining the earlier proposal in the consultation paper, the panel suggested 20 per cent tax for the income bracket Rs 1 lakh (Rs 100,000) to Rs 4 lakh (Rs 400,000).
It suggested Rs 60,000 plus 30 per cent of the income above Rs 4 lakh.
The panel suggested that the present surcharge of 5 per cent on tax payers with incomes above Rs 60,000 be eliminated.
It said the revenue gain from the levy of surcharge is generally 'illusory' since it has the effect of increasing the marginal rate of tax, which adversely affect compliance.
In order to protect the low income groups, the task force has recommended an interest subsidy of 2 per cent for housing loans up to Rs 5 lakh (Rs 500,000) to all borrowers.
This will help house builders whose income is less than Rs 1 lakh, the panel said, adding that until this proposal is adopted, interest deduction of up to Rs 50,000 may continue.
Citing data provided by the National Housing Bank, it said this would cover about 85 per cent of the total borrowers and all borrowers from low income groups.
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