Admittedly, though tax rates are now quite low in India, much can be said about the minimum level of income that is taxed which offsets the low tax rates. While the maximum rate of tax for individuals is 30 per cent, the fact is that he gets taxed as soon as he earns more than Rs 40,000. And as soon as he reaches an income of Rs 150,000, he is taxed at the highest rate.

Thus, the low tax rates are illusory. There is a strong case for very substantially increasing the minimum tax limit but, if required for offsetting revenue losses, the highest marginal rate of tax could be increased to, say, 40 per cent, beyond income of Rs 15,00,000.

Another change the forthcoming Finance Bill could address is for salaried employees.The treatment of salaried employees is perhaps the most rigid and inequitable. It is a fact of these globalised times, which are bottom line and performance-oriented in terms of employee evaluation, that increasingly employees work on the move and at home. Hence, their expenses borne out of their own pockets have skyrocketed. Telephone and mobile expenses, expenses at home for work (including for computers), e-mail and fax, travelling and research are just a few of them. The employer is often reluctant to adopt a policy of reimbursing all expenses and, instead, a total package is given for remuneration as well as expenses leaving him to decide how much to spend. Unlike businessmen, however, the employee gets a pitiful deduction of Rs 20,000. What is humiliating to him, however, is that, once he reaches an income of Rs 500,000, even that small deduction is not available, thanks to the new provision introduced in the last budget. It is time that when more and more employees are treated as partners of progressand given freedom to act as entrepreneurs that deductions be available to them at par with businessmen. There is a strong case for a higher fixed standard deduction and an additional deduction on actuals of expenditure incurred for the purposes of his employment. Presently, a scheme of advance ruling exists whereby mainly non-residents can refer specific issues in advance to the authority and the reply given would be binding on the department. The advantage clearly is that the assessee can foresee the tax consequences in advance of a transaction and, if they are unfavourable, even drop the proposal. In these days of competitive and global environment, even the resident Indian assessee has to consider major business transactions such as those of business restructuring. Further, new business opportunities emerge whose tax treatment is not clear simply because tax laws have not even foreseen such transactions. Examples that can be given are of e-commerce and options & futures. Tax laws will take years to even beenacted to deal with them specifically and even longer to settle. Uncertainties, however, may be discouraging on persons seeking to undertake such transactions. While an amendment had been introduced by the last Finance Bill, it was neither specifically broad nor has taken off. Such transactions and others could be considered for decision by the authority for advance rulings to enable an assessee to decide with certainty.

The recent Companies (Amendment) Ordinance 1999 has introduced a scheme of issue of sweat equity shares. As is known, the intention is to benefit those persons who have such intangible assets to offer which may not be capable of easy valuation. Hence, the law permits issue of shares to them at a discount. Of course, the guidelines for this by the Securities and Exchange Board of India as well as by the Department of Company Affairs are awaited and till that time such shares may not be issued. However, one may not have to wait long for this. There are several issues of tax that may arise inconnection with shares. The issues are relevant for the company that issues such shares and the allottees of such shares. In the hands of the shareholder, the questions are--whether the discount on issue of such shares be taxable? What will be the treatment of the value of shares received? Will it be taxed as salary income? Or will these be taxed as capital gains? If yes, what deductions will he get for the value of the asset transferred? In the hands of the company, the issues that can arise are--what will be the treatment of discount on issue of shares? Will it be allowable as a deduction? How will the assets received be valued, particularly for purposes of depreciation? Question will also arise whether the assets or benefits acquired be deductible wholly as a expenditure. While the answer to this last question may mainly depend upon the type of asset acquired, uncertainty may still prevail.

The Finance Bill will need to consider making changes in the Income-tax Act to ensure that not only assessees donot find tax laws as a millstone reducing his speed and flexibility, but also that reforms in other laws are not frustrated by uncertainties in tax.

(The author is a Mumbai-based chartered accountant)