February 28, 2008 will be the day when the Finance Minister P Chidambaram will present his Union Budget. While all the industries and associations would have already made their presentations by now, here's a last minute wish-list on taxes.

A very simple, but most vital principle for any finance minister, entrusted with the task of raising revenues for his country, comes from Chanakya's Arth Shastra "to collect taxes from citizens the way a bee collects honey from the flowers quietly without inflicting pain".

With general elections due in 2009, our FM should emulate Chanakya and make the Aam Admi feel happy by making his life has been made bit more cozy. This can be achieved by raising the basic exemption limit to Rs 250,000 across the board for all tax payers, from the present limits of Rs 145,000 for women, Rs 195,000 for senior citizens and Rs 110,000 for others.

Considering the all-time high savings rate of 34 per cent, citizens could be further rewarded and encouraged into savings by raising the limit of deduction under section 80C to Rs 200,000 from the present Rs 100,000 among three sections 80C, 80CCC and 80CCD.

With unprecedented buoyancy in all tax revenues, particularly direct income tax and corporate tax, exceeding all-time high collections of indirect taxes like service tax, excise and customs duties, FM should take the bold step to reduce the direct taxes across the board.

He could begin, at least by abolishing all surcharges and education cess. To individuals and hindu undivided families, with income over Rs 10 lakh (Rs 1 million) it will result in 4 per cent tax saving for them. (From 30% + 10 + 3% = 33.99%).

A little known fact about a surcharge, unlike the basic levy, is that it is retained by the Central Government and is not shared among the States. No wonder no FM likes to give up this bounty. In any case, there is no economic justification for the levy of "education cess".

Providing funds for education of the citizens' children is of paramount importance as vital as defence of the country. If FM can levy education cess to meet the cost of education, then why not a defence cess, health cess, food cess and so on. Surely, the citizens will start wondering what are they paying taxes for.

In any case, taxes like Fringe Benefit Tax and bank withdrawals tax have been major irritants to the citizens, without corresponding large tax collections for the exchequer.

Retaining every year, an ill-conceived and badly drafted FBT is causing a lot of hear-burn. FBT will go down as the most hated tax, ever levied on Indian tax payers, not for the quantum of its imposition, but for its illogical basis and rationale.

Finally, tax administration needs to be made tax-payer friendly. Tax officials should treat tax-payers as welcome customers rather than as helpless victims to be exploited and threatened as in a police station.