Monday, February 14 2005 16:56 Hrs (IST) - World Time -

New Delhi: The Budget for 2005-06 is unlikely to toe the Kelkar panel's line of doing away with tax incentives on long term savings and housing, but Finance Minister P Chidambaram will have a "hard look" at all other sops in a bid to widen tax base.

The move to retain sops on housing, insurance and pension schemes comes after pressure from Congress and Left parties.

There has been pressure from within UPA (United Progressive Alliance) to retain these sops to raise the savings and investment rates, which was necessary for the country to sustain high economic growth in the years to come, sources said.

That apart, the housing sector is booming on the back of industrial and services sectors and the Government did not want to dampen it by removing the tax incentive of up to Rs 1.5 lakh on interest payment for housing loans.

Housing sector is also a major employment generator and creates demand for allied industries like steel and cement.

Sources said tax sops for insurance and pension may also continue as these sectors contribute to savings.

The insurance industry, as well as the regulator IRDA, had sounded the alarm bell when Kelkar panel had suggested lifting of various exemptions under Section 88, 80CCC and 10(10D) of Income Tax Act.

Since India does not have a social security system, sources said the budget will keep intact the incentive of Rs 10,000 annual deduction from income for pension contribution as envisaged under Section 80 CCC of Income Tax Act, in order to encourage more people to save for retirement.