July 29, 1989

LEAD: On the eve of a Sri Lankan deadline for the withdrawal of Indian troops, President Ranasinghe Premadasa tonight announced a face-saving compromise that sharply reduces the chance of confrontation between the two armies.

LEAD: In rejecting much of President Bush's military budget this week, the House of Representatives seemed driven more by political tactics and parochial interests than by a competing vision of national security.

LEAD: Israeli commandos abducted a leader of the Party of God, a pro-Iranian group, from his home in southern Lebanon early this morning and took him and two associates to Israel, the army said.

LEAD: With Congress moving toward some kind of cut in the capital gains tax, President Bush suggested today for the first time that he would accept less than the amount in his original proposal.

LEAD: Wrongdoing at the I.R.S. A Congressional inquiry has raised questions about whether misconduct is widespread at the agency that collects more than $1 trillion a year in taxes. News Analysis. Page 31. Winner Seen in Iran The Speaker of Iran's Parliament appeared headed for victory in presidential elections, and Iran experts said they expected that his victory would start an era of realism.