Sunday, February 12 2006 11:26 Hrs (IST) - World Time -

New Delhi: The salaried class may not get any income tax relief by way of changes in rates, but some burden is likely to be taken off their shoulders, as the coming Budget may allow tax exemptions for their investments in mutual funds and fixed bank deposits.

Government servants too may have good news in the budget, which is widely expected to announce setting up of the Sixth Pay Commission, official sources told sources.

As Finance Minister P Chidambaram has already promised, Budget would simplify Fringe Benefit Tax to remove the glitches in its implementation. In fact, Prime Minister Manmohan Singh has made it clear that taxes should be 'moderate and not confiscatory'.

As a logical step forward from state-level VAT, there is a growing demand to move towards Goods and Service tax as part of reforming indirect taxes. It is to be seen if Chidambaram would unveil a roadmap in this regard in the budget.

He has already gone on record saying that tax reforms would be carried out, besides reducing customs duty to align it with ASEAN levels.

There is widespread speculation that cars might become cheaper, as the special additional excise duty of eight per cent would be withdrawn to move towards single rate of 16 per cent excise duty.

To wean away investment from small savings schemes to equity and debt markets, the Budget is likely to bring investment in mutual funds to the list of savings instruments exempted from income tax.

As a measure to discourage small savings, the Government has done away with bonus for Post Office Monthy Income Scheme on the maturity of deposits for new subscribers from February 13.