The BJP on Sunday rejected the Kelkar committee's recommendations on personal income tax, interest rates on small savings, tax benefits for housing loans and pensioners as they formed a large portion of the burgeoning middle class, but favoured most of its proposals on indirect taxes.

On taxing agricultural income, the party felt it was not totally averse to the idea but a political consensus was needed as it was a complex and controversial issue, BJP sources said. Besides, it also requires amendments to the Constitution as agriculture is a state subject.

The party's committee, headed by Rajnath Singh, felt the Kelkar panel's recommendations on taxes were 'anti-farmer and anti-middle class', the sources said.

The BJP wanted the tax break of up to Rs 150,000 on interest on housing loans be retained along with standard deductions and incentives for small savings, the sources said after the nearly two-hour meeting was attended by former convener of the party's economic cell Jagdish Shettigar, the current chairman P N Vijay and Lok Sabha member Kirit Somaiyya.

While the BJP favoured most of the proposals in indirect taxes, including lowering of custom and excise rates, it was against removing the cess on petrol and diesel saying the cess had helped a great deal in mobilising resources for Prime Minister Atal Bihari Vajpayee's ambitious highway project.

It supported incentives on life insurance and provident fund as they could provide long term loans, which were required for long gestation investments in sectors like infrastructure.

The party is against the proposal to abolish tax incentives on savings as it would not be prudent when the government is keen to push up savings to achieve higher investments and growth in the 10th Plan, the sources said.

The party felt that the best way to mop up more revenue was to push up growth as it is well known that a one per cent increase in GDP would fetch thousands crores of rupees as additional revenue.

The party said that revenue had always been buoyant whenever the manufacturing sector performed well, the sources said. It noted that in the early nineties when this sector recorded a double digit growth, customs and excise collections were substantially higher.

Singh said the committee would submit its report to Union Finance Minister Jaswant Singh on January 11 after
discussions with BJP president M Venkaiah Naidu.