The Kelkar task force's final report on direct taxes will recommend tax deduction of up to Rs 50,000 a year for mortgage interest on housing loans. At present, interest payment of up to Rs 1,50,000 a year is eligible for deduction.
According to sources in the task force, the change in the housing tax proposal was a middle path adopted by the Kelkar panel, keeping in mind the finance minister's repeated announcements about the need to give a fillip to the housing sector.
"This will cover all housing loans with a quantum of Rs 500,000-600,000," said a source.
The task force had originally recommended phasing out the housing tax exemption by reducing the available deduction for interest on loans from Rs 150,000 now to Rs 100,000 in assessment year 2004-05, Rs 50,000 in assessment year 2005-06 and nil in assessment year 2006-07.
While the task force has relaxed its recommendations on housing tax incentives, it has decided not to change its proposal on taxation of farm income despite the Rajnath Singh committee's observations to the contrary.
The final report, to be submitted by the task force to the finance minister this week, has also said Section 10A and 10B benefits for export-oriented units and software export companies will stay.
The task force had, in its consultation paper, recommended elimination of the two sections of the Income Tax Act.
Sources in the task force also said the final report would also recommend elimination of Section 80IA in respect of profits of infrastructure companies in the telecommunications and power sectors or special economic zones.
Also, it has recommended that exemptions under Section 80IB for companies in backward areas be eliminated.
The task force has called for alignment of the depreciation rates in accordance with the provisions of the Companies Act. It had also retained its original recommendation for elimination of the minimum alternate tax, sources said.
While the report will reiterate its recommendation for a two-rate personal income tax structure of 10 per cent and 20 per cent, sources said it had been now decided to retain the rebate under Section 88B available to senior citizens.
To take care of the middle class, the task force has also decided to provide certain set-offs and incentives to ensure that individuals in the Rs 100,000-200,000 income bracket are better off in the proposed two-slab tax regime.
