UPSC Prelims 2004 Q36: Indian Economy – Taxation
Which of the following is not a recommendation of the task force on direct taxes under the
chairmanship of Dr. Vijay L. Kelkar in the year 2002?
- (a) Abolition of Wealth Tax
- (b) Increase in the exemption limit of personal income to Rs. 1.20 lakh for widows
- (c) Elimination of standard deduction
- (d) Exemption from tax on dividends and capital gains from the listed equity
Answer: (b) Increase in the exemption limit of personal income to Rs. 1.20 lakh for widows
Explanation
Kelkar Task Force on direct taxes, 2002
| Item | Recommended? |
|---|---|
| Abolition of Wealth Tax | Yes |
| Exemption limit Rs 1.20 lakh for widows | Not a recommendation in the key |
| Elimination of standard deduction | Yes |
| Exemption of dividends and capital gains from listed equity | Yes |
The option on an exemption limit of Rs 1.20 lakh for widows was not among the recommendations of the Kelkar Task Force.
Answer: (b) Increase in the exemption limit of personal income to Rs. 1.20 lakh for widows.
Why each option is right or wrong
- (a) Incorrect. The task force did recommend abolition of wealth tax.
- (b) CORRECT. This was not a recommendation of the task force.
- (c) Incorrect. The task force recommended eliminating the standard deduction.
- (d) Incorrect. It recommended exempting dividends and capital gains on listed equity.
Key point
Kelkar Task Force: simplify taxes, no exemptions, abolish wealth tax, fewer deductions.
Remember
The Kelkar panel recommended abolishing wealth tax and standard deduction.
Common mistakes
- Reading the question as asking for a recommended item.
- Assuming it raised the exemption for every category.
- Mixing it with the Chelliah committee.
Exam tip
Kelkar: broaden the base, lower rates, remove exemptions.
Sources
- Ministry of Finance, Government of India — Report of the Task Force on Direct Taxes (Chairman: Vijay L. Kelkar), 2002
- Ministry of Finance, Government of India — Economic Survey 2002–03 (tax reform)