The chamber in its post-budget memorandum to finance minister has drawn attention of the government, the various anomalies in the tax proposals as well as such budget provisions which will cause hardships and asked for re-consideration.

The chamber had strongly recommended that all expenditure incurred on Y2K compliance on or before March 31, 2000 should be allowed as deductible expenditure, including the expenditure incurred prior to March 31, 1999.

The chamber said that the government should give desired encouragement to the housing industry and any interest on any loan taken after March 31, 1999 in respect of either the housing projects under construction or any new housing project started thereafter should be eligible for deduction interest of Rs 75,000.

Regardingstock options, BCCI said that it fears the proposed amendment in Section 17 of the income-tax Act may also lead to the taxation of employees as shareholder if they receive bonus shares or shares out of a "reserve quota" or otherwise as share holders or public along with public issue or rights issue of the companies if such issues are made at a price less than the market price prevailing on the date of allotment.

``It is recommended that the issue of bonus shares and public/rights issue made at a uniform price to employees and other shareholders should be exempted from the proposed amendment to Section 17. CBDT circular in 1995 covered such a scenario, wherein it stated that the company offers shares to the employees at the same price as have been offered to the other shareholders or the general public there would be no perquisite, the BCCI said.

The proposed amendment does not indicate as to the date of market price which will be considered as perquisite value. The chamber has recommended that the marketprice prevailing on the date of exercise of option should be considered for the purpose of computing perquisite value u/s 17(2)(iiia) as is specified in section 49 (2B).

The difference between the market price and issue price is proposed to be taxed in the year of exercising the option even though the concerned employee did not realise any gain as in most cases, he or she is required to hold the shares for a certain lock-in period. Many employees will face financial difficulties in paying taxes when they have not realised the gain.

It is recommended that, while the computation of perquisite value can be done in the year of exercising option, as proposed in the finance bill the tax should be collected only when such shares are either sold or when the lock in period is completed and the employees is entitled to sell the shares.

The chamber also strongly recommends to the government to review surcharge on income-tax for corporates and individuals and give a commitments that this surcharge will bediscontinued in the next budget, so that the positive trend of higher voluntary compliance is not reversed.