New Delhi: Kelkar Task Force on tax reforms on November 2 suggested drastic steps to end "exemption-raj", proposed 2-slab income tax rates of 20 and 30 per cent with a Rs 1,00,000 exemption limit and bringing in agricultural income of non- agriculturists under the tax net.

The consultation paper on direct taxes submitted by the task force to Finance Minister Jaswant Singh on November 2 mooted wide-ranging reform of corporate tax by reducing the rate to 30 per cent from the present 36.75 per cent for domestic companies and to 35 per cent from 40 per cent for multinational companies (MNCs), besides abolition of dividend tax and minimum alternate tax (MAT).

The panel headed by Finance Minister's Advisor Vijay Kelkar proposed abolition of wealth tax and long-term capital gains tax while scrapping of standard deduction and tax incentives on savings.

Giving details of the recommendation, Kelkar told reporters the main tax policies suggested raising exemption limit to Rs 1 lakh from Rs 50,000 now, a 20 per cent tax on income of Rs 1-4 lakhs annually and 30 per cent for beyond Rs 4 lakhs.

Kelkar said the Task Force was in favour of "big-bang" approach to carry forward the direct tax reforms.

Taking into consideration the political aspects for carrying forward such drastic changes, it also provided a second option of phasing out the exemptions and reduction in tax rates in a three-year period.

The Task Force, which made its recommendations in two volumes, suggested a Tax Information Network (TIN) system through the nationwide network of National Securities Depository Ltd (NSDL) to tone up tax administration, enabling taxmen to focus on inspection and assessment only.

The TIN system would assess the tax deducted at source (TDS) of all taxpayers, process advance tax and refunds.

PTI