Industry has pitched for gradual reduction in corporate tax to 25 per cent from the current 30 per cent, claiming it will bring the tax incidence at par with similar economies and make India competitive.
The government, however, is in no mood to relent given its financial position. It may, instead, look for new routes to mobilise resources for funding various social security schemes, the sources said.
In line with this approach, the long term capital gains tax could be raised.
Long-term capital gains (LTCG) exceeding Rs 1 lakh are currently taxed at the rate of 10 per cent. The LTCG tax on stock could be raised to mop up some additional revenue.
"There are various proposals to find new source of funds. Raising capital gains tax is one of the options," said an official.
In a letter to industry and other stakeholders, Revenue Secretary Ajay Bhushan Pandey had advised them to send Budget proposals keeping in mind the announcement made in 2015-16 to reduce the rate of corporate tax from 30 per cent to 25 per cent. A roadmap has already been finalised in this regard.
Further, various kinds of incentives and exemptions would be phased out, according to sources.
After returning to power for the second term, the Modi government has hinted that social sector schemes would continue to be the key priority going forward.
By announcing the inclusion of all farmers under the PM KISAN scheme irrespective of the size of land-holdings, the government has signalled that such programmes would be the focus.
"Going by the trend so far, rich people would definitely be made to contribute in many ways for development," said a tax consultant wishing not to be named.
( With inputs from IANS )