The excitement over the tax proposals in the Budget having subsided, it is time to assess them with regard to the proposals that seem anomalous and irrational.

This observation raises some basic questions. First, is it a good policy to give something with one hand and take it back with the other? If this is done, the pronounced generosity loses its grace.

Second, the relief by way of standard deduction cannot compensate for the extra burden on account of surcharge.

A person with taxable salary income (before standard deduction) of Rs 12 lakh will have a tax liability of Rs 3,34,000. The difference in tax on account of standard deduction of Rs 20,000 will be Rs 6,000, reducing the tax to Rs 328,000.

However, with the proposed 10 per cent surcharge, the extra burden on tax of Rs 334,000 will be Rs 33,400. Thus, the beneficiary of Rs 20,000 standard deduction will have to pay extra tax of Rs 27,400 more than the amount for which he gets deduction. A non-salaried taxpayer’s liability on account of surcharge will increase by Rs 33,400.

The issue is whether such extra tax burden on individuals and HUFs is just and fair vis-à-vis corporate and other entities and whether the discrimination made has some rationale, economic or otherwise, as to why individuals and HUFs earning more by putting in more labour and effort or because of their superior efficiency should be penalised by subjecting them to a higher tax than those not doing so. Prima facie, there is no justification for this.

If the finance minister’s view is that higher incidence of tax is justified on the principle of ability to pay then the same principle has to be applied in cases of corporations and local authorities. In their cases, higher surcharge on incomes exceeding Rs 8.5 lakh needs to be made applicable.

Third, there is no mention as to how the figure of Rs 8.5 lakh has been arrived at. It appears to have been adopted in an ad hoc and arbitrary manner. A law based on ad-hocism and arbitrariness loses respect and affects the credibility of the government.

There is, obviously, no logic in imposing a 10 per cent surcharge on tax on incomes exceeding Rs 8.5 lakh in case of personal taxation. It is expected that the finance minister who is very fair and just in his approach will remove this aberration.

In the same paragraph, Singh has said: “Stability and continuity are commended as virtues in tax regimes. I intend to be virtuous.”

Yet vide Clause 61 of the Finance Bill, provisions of Chapter XIVB, introduced only with effect from July 1995 and extensively amended by the Finance Act, 2002, to remove the deficiencies noticed in its working relating to block assessment procedure for search cases, are proposed to be discontinued from May 31, 2003 and a new procedure introduced from June 1, 2003, vide Sections 153A to 153C.

The reasons given in the Explanatory Memorandum do not justify the change proposed. Litigation in tax matters cannot be avoided despite the best intentions and efforts to draft the most astute legal provisions.

The impact of the amendments made by the Finance Act effective from June 1, 2002, to streamline the scheme is yet to surface and be evaluated.

The reasons mentioned concerning the treatment of particular income as “undisclosed income” and controversies mentioned concerning the same, prima facie, relate to the position before the amendment of this definition by the Finance Act, 2002.

There should have been no hurry for scrapping the scheme without evaluation. The decision is contrary to the concept of stability and continuity valued by the finance minister.

Concerning search proceedings, it has been said that stocks found during searches will not be seized. A similar decision is necessary concerning moveable assets shown in wealth tax returns.

Taking confessional statements during searches has been banned. The same view is necessary with regard to survey operations.

The substitution of a new Section 88DD to harmonise the criteria for defining disability as existing under the income tax Rules with the criteria prescribed under the persons with Disability (Equal opportunities, Protection of Rights and Full Participation) Act, 1995, increase in the existing amount of deduction of Rs 40,000 to Rs 50,000 and Rs 75,000 for people with severe disabilities is a welcome change.

However, there seems to be no ground for restricting the benefit to only one disabled dependent. Some people have more than one such person to support, and hence, the benefit needs to be extended to all disabled people fulfilling the prescribed criteria of disability. This seems necessary in the absence of a comprehensive social security coverage for the country’s population.