The following measures are expected to be taken up for consideration for 2008-09 Union Budget:

• The standard tax deduction limit for individual tax payers may be raised 20 percent to Rs 120,000, which will allow a taxpayer to save up to Rs 2,000 in taxes every year.
• Personal income tax exemption limit is likely to be raised to Rs 1.25 lakh a year from existingRs 1.1 lakh.
• Life-saving medicines used in the treatment of cancer, AIDS and diabetes may be exempted from duties.
• A cut in sales tax on aviation turbine fuel and scrapping of service tax on business and first-class tickets for Indian international carriers may be considered on the demand of union civil aviation minister for rationalisation of avaition tax structure.
• Indirect taxes on consumer goods may be moderated to boost consumption.
• Imported set top boxes may attract a customs duty of 5 per cent, in a move to encourage domestic goods.
• Public sector banks may be exempted from fringe benefit tax on their contribution to statutory pension funds.
• Duties on consumer electronics goods may be cut to 12 per cent from 16 per cent.
• Pass-through status for venture capital funds investing in food processing industry and infrastructure facilities such as warehouses may be restored. The status allows tax exemption for earnings of venture capital funds.
• A proposal to waive taxes on the provisioning of non-performing (NPA) assets by banks is also in the pipeline and may get the nod of the government, especially on farm sector lending. NPA provisioning is taxed at the rate of 30 per cent now.
• The 5 per cent customs duty for liquefied natural gas used as fuel in power generation projects is likely to be withdrawn

Income Tax is one of the most important issues and the one which affects the more number of people directly. It is expected that many charitable establishments, which are into commercial activities and are exempted from income tax might be brought under the tax circle. It is believed that government is also speculating that tax exemptions availed by certain companies in the country should be altered or modified. There are certain commercial organizations, which perform charitable activities. As mentioned above, these establishments were exempted from the payment of income tax because these organizations had applied for tax exemptions after registering as per Section 12A of Income Tax Act 1961. The Central Board of Direct Taxes or the CBDT has been monitoring the activities of these organizations closely. The CBDT holds the opinion that in the disguise of charity, these establishments may be indulging in the misappropriation of funds by being registered under the Section 12A thereby avoiding tax payment. Expectations about Income Tax Exemption From Budget 2008 also include bringing about changes pertaining to the tax application in matters related to these establishments. It is expected that the budget 2008 would redefine the role of these charitable organizations by law, failing which would subject the tax departments to more incidence of loss over the years.

In the budget of 2006-07, P. Chidambaram, the Finance Minister had increased the limit of exemption on personal income to Rs 1,10,000 from Rs 10,000. In this context, it may be mentioned that this led to very little saving . A tax payer could approximately save only Rs 1000 (in taxes) as a result.

In the event of the implementation of the new measure, a tax payer would approximately pay Rs.9000 less as taxes. This amount of saving could be done provided the individual has an income of Rs 2,00,000 annually. By increasing the limit of exemption, rate of inflation can also be taken care of.

Issue of Tax Compliance in Budget 2008 (expected)

On 6th of December 2007, the Finance Ministry announced the issue of tax compliance in budget 2008. It is learnt that the tax payers would be benefited reviewing the direct tax rates and increasing the voluntary compliance.

The level of tax compliance was increasing significantly for the last two or three years. During the fiscal year 2006-07, almost 31.9 million tax payers of India have filled their income tax returns, which is not an exciting figure at all keeping in mind the population in India. Government would like to get in more and more people to pay taxes in this fiscal.

But the government has announced that it will focus more on the tax compliance issues. The Finance Ministry will not increase the maximum marginal rate of personal income tax further, for it may result in voluntary compliance. The Advisor to the Union Finance Minister of India has said that, the government will now be able to keep track on the ups and downs of voluntary compliance. Maximum marginal rate of personal income tax will be 30%. However, the base of the taxpayer is not large as it ought to be because a big portion of the population of the Indian economy lie below the poverty line.