Budget-2010- Direct Tax Proposals

TAX PROPOSALS:

  • The Centralized Processing Centre at Bengaluru is now fully functional and is processing around 20,000 returns daily. Two more Centres will also be established during the year.
  • The Income Tax department has introduced “Sevottam”, a pilot project at Pune, Kochi and Chandigarh through Aayakar Seva Kendras, which provide a single window system for registration of all applications including those for redressal of grievances as well as paper returns.
  • The income tax department to notify SARAL-II form for individual salaried taxpayers for the coming assessment year.
  • Scope of cases which may be admitted by the Settlement Commission expanded to include proceedings related to search and seizure cases pending for assessment.
  • Scope of Settlement Commission also expanded in respect of Central Excise and Customs to include certain categories of cases that hitherto fell outside its jurisdiction.
  • Bi-lateral discussions commenced to enhance the exchange of bank related and other information to effectively track tax evasion and identify undisclosed assets of resident Indians lying abroad.

Direct Taxes

•  Income tax slabs for individual taxpayers to be as follows :

Income upto Rs 1.6 lakh NIL
Income above Rs 1.6 lakh and upto 10 per cent
Rs. 5 lakh
Income above Rs.5 lakh and upto Rs. 20 per cent
8 lakh
Income above Rs. 8 lakh 30 per cent

•  Taxability on Taxable income of Rs. 10 Lakhs :

OLD NEW SAVING
MALE 210,120.00 158,620.00 51,500.00
FEMALE 207,030.00 155,530.00 51,500.00
SENIOR
CITIZEN 201,880.00 150,380.00 51,500.00
  • Deduction of an additional amount of Rs. 20,000 allowed, over and above the existing limit of Rs.1 lakh on tax savings, for investment in long-term infrastructure bonds as notified by the Central Government.
  • Besides contributions to health insurance schemes which is currently allowed as a deduction under the Income-tax Act, contributions to the Central Government Health Scheme also allowed as a deduction under the same provision.
  • Current surcharge of 10 per cent on domestic companies reduced to 7.5 per cent.
  • Rate of Minimum Alternate Tax (MAT) increased from the current rate of 15 per cent to 18 per cent of book profits.
  • Weighted deduction on expenditure incurred on in-house R&D enhanced from 150 per cent to 200 percent. Weighted deduction on payments made to National Laboratories, research associations, colleges, universities and other institutions, for scientific research enhanced from 125 per cent to 175 per cent.
  • Payment made to an approved association engaged in research in social sciences or statistical research to be allowed as a weighted deduction of 125 per cent. The income of such approved research association shall be exempt from tax.
  • Benefit of investment linked deduction under the Act extended to new hotels of two-star category.
  • Allow pending projects to be completed within a period of five years instead of four years for claiming a deduction of their profits, as a one time interim relief to the housing and real estate sector.
  • Limits for turnover over which accounts need to be audited enhanced to Rs. 60 lakh for businesses and to Rs. 15 lakh for professions.
  • Limit of turnover for the purpose of presumptive taxation of small businesses enhanced to Rs. 60 lakh.
  • If tax has been deducted on payment by way of any expense and is paid before the due date of filing the return, such expenditure to be allowed for deduction.
  • Interest charged on tax deducted but not deposited by the specified date to be increased from 12 per cent to 18 per cent per annum.
  • Increase in threshold limit for tax deduction at source :
Section Nature of Payment Existing Revised Applicability
threshold limit of threshold
Payment limit of
(Rupees) Payment
(Rupees)
194B Winnings from lottery 5,000 10,000 Ist July,
or crossword puzzle 2010
194BB Winnings from horse 2,500 5,000 Ist July,
race 2010
194C Payment to 20,000* 30,000* Ist July,
contractors 2010
50,000** 75,000** Ist July,
2010
194D Insurance 5,000 20,000 Ist July,
commission 2010
194H Commission or 2,500 5,000 Ist July,
Brokerage 2010
194-I Rent 1,20,000 1,80,000 Ist July,
2010
194J Fees for professional 20,000 30,000 Ist July,
or technical services 2010
  • No Capital gain transfer of assets as a result of conversion of small companies into Limited Liability Partnerships.
  • The advancement of any other object of general public utility” to be considered as “charitable purpose” even if it involves carrying on of any activity in the nature of trade, commerce or business provided that the receipts from such activities do not exceed Rs.10 lakh in the year .
  • Proposals on direct taxes estimated to result in a revenue loss of Rs. 26,000 crore for the year.

Budget-2010-Indirect Tax Proposals

Indirect Taxes

Custom & Excise.

  • The standard rate on all non-petroleum products enhanced from 8 per cent to 10 per cent ad valorem.
  • The specific rates of duty applicable to portland cement and cement clinker also adjusted upwards proportionately. Similarly, the ad valorem component of excise duty on large cars, multi-utility vehicles and sports-utility vehicles increased by 2 percentage points to 22 per cent.
  • Restore the basic duty of 5 per cent on crude petroleum; 7.5 per cent on diesel and petrol and 10 per cent on other refined products. Central Excise duty on petrol and diesel enhanced by Re.1 per litre each.
  • Some structural changes in the excise duty on cigarettes, cigars and cigarillos to be made coupled with some increase in rates. Excise duty on all non-smoking tobacco such as scented tobacco, snuff, chewing tobacco etc to be enhanced. Compounded levy scheme for chewing tobacco and branded unmanufactured tobacco based on the capacity of pouch packing machines to be introduced.

Agriculture & Related Sectors

  • Provide project import status with a concessional import duty of 5 per cent for the setting up of mechanised handling systems and pallet racking systems in ‘mandis’ or warehouses for food grains and sugar as well as full exemption from service tax for the installation and commissioning of such equipment.
  • Provide project import status at a concessional customs duty of 5 per cent with full exemption from service tax to the initial setting up and expansion of Cold storage, cold room including farm pre-coolers for preservation or storage of agriculture and related sectors produce ; and Processing units for such produce.
  • Provide full exemption from customs duty to refrigeration units required for the manufacture of refrigerated vans or trucks.
  • Provide concessional customs duty of 5 per cent to specified agricultural machinery not manufactured in India;
  • Provide central excise exemption to specified equipment for preservation, storage and processing of agriculture and related sectors and exemption from service tax to the storage and warehousing of their produce; and

• Provide full exemption from excise duty to trailers and semi-trailers used in agriculture.

  • Concessional import duty to specified machinery for use in the plantation sector to be, extended up to March 31, 2011 along with a CVD exemption.
  • To exempt the testing and certification of agricultural seeds from service tax.
  • The transportation by road of cereals, and pulses to be exempted from service tax. Transportation by rail to remain exempt.
  • To ease the cash flow position for small-scale manufacturers, they would be permitted to take full credit of Central Excise duty paid on capital goods in a single installment in the year of their receipt. Secondly, they would be permitted to pay Central Excise duty on a quarterly, rather than monthly, basis.

Environment

  • To build the corpus of the National Clean Energy Fund, clean energy cess on coal produced in India at a nominal rate of Rs.50 per tonne to be levied. This cess will also apply on imported coal.
  • Provide a concessional customs duty of 5 per cent to machinery, instruments, equipment and appliances etc. required for the initial setting up of photovoltaic and solar thermal power generating units and also exempt them from Central Excise duty. Ground source heat pumps used to tap geo-thermal energy to be exempted from basic customs duty and special additional duty.
  • Exempt a few more specified inputs required for the manufacture of rotor blades for wind energy generators from Central Excise duty.
  • Central Excise duty on LED lights reduced from 8 per cent to 4 per cent at par with Compact Fluorescent Lamps.
  • To remedy the difficulty faced by manufacturers of electric cars and vehicles in neutralising the duty paid on their inputs and components, a nominal duty of 4 per cent on such vehicles imposed. Some critical parts or sub-assemblies of such vehicles exempted from basic customs duty and special additional duty subject to actual user condition. These parts would also enjoy a concessional CVD of 4 %.
  • A concessional excise duty of 4 per cent provided to “soleckshaw”, a product developed by CSIR to replace manually-operated rickshaws. Its key parts and components to be exempted from customs duty.
  • Import of compostable polymer exempted from basic customs duty.

Infrastructure

  • Project import status to ‘Monorail projects for urban transport’ at a concessional basic duty of 5 per cent granted.
  • To allow resale of specified machinery for road construction projects on payment of import duty at depreciated value.
  • To encourage the domestic manufacture of mobile phones accessories, exemptions from basic, CVD and special additional duties are now being extended to parts of battery chargers and hands-free headphones. The validity of the exemption from special additional duty is being extended till March 31, 2011.

Medical Sector

  • Uniform, concessional basic duty of 5 per cent, CVD of 4 per cent with full exemption from special additional duty prescribed on all medical equipments. A concessional basic duty of 5 per cent is being prescribed on parts and accessories for the manufacture of such equipment while they would be exempt from CVD and special additional duty.
  • Full exemption currently available to medical equipment and devices such as assistive devices, rehabilitation aids etc. retained. The concession available to Government hospitals or hospitals set up under a statute also retained.
  • Specified inputs for the manufacture of orthopaedic implants exempted from import duty.

Infotainment

• To address the difficulties experienced by film industry in importing digital masters of films for duplication or distribution loaded on electronic medium vis-à-vis those imported on cinematographic film, owing to a differential customs duty structure, customs duty to be charged only on the value of the carrier medium. The same dispensation would apply to music and gaming software imported for duplication. In all such cases the value representing the transfer of intellectual property rights would be subjected to service tax.

  • Provide project import status at a concessional customs duty of 5 per cent with full exemption from special additional duty to the initial setting up “Digital Head End” equipment by multi-service operators.

Precious Metals

  • Rates on precious metals indexed as follows:

: On gold and platinum from Rs.200 per 10 grams to Rs.300 per 10 grams

: On silver from Rs.1,000 per kg to Rs.1,500 per kg.

  • Basic customs on Rhodium – a precious metal used for polishing jewellery reduced to 2 per cent.
  • Basic customs duty on gold ore and concentrates reduced from 2 per cent ad valorem to a specific duty of Rs.140 per 10 grams of gold content with full exemption from special additional duty. Further, the excise duty on refined gold made from such ore or concentrate reduced from 8 per cent to a specific duty of Rs.280 per 10 grams.

Other Proposals

  • Full exemption from import duty available to specified inputs or raw materials required for the manufacture of sports goods expanded to cover a few more items.
  • Basic customs duty on one of key components in production of micro-wave ovens, namely magnetrons, reduced from 10 per cent to 5 per cent.
  • Value limit of Rs. 1 lakh per annum on duty-free import of commercial samples as personal baggage enhanced to Rs. 3 lakh per annum.
  • Complete exemption from special additional duty provided to goods imported in a pre-packaged form for retail sale. This would also cover mobile phones, watches and ready-made garments even when they are not imported in pre-packaged form. The refund-based exemption is also being retained for cases not covered by the new dispensation.
  • Toy balloons fully exempted from Central Excise duty.
  • Reduction in basic customs duty on long pepper from 70 per cent to 30 per cent;
  • Reduction in basic customs duty on asafoetida from 30 per cent to 20 per cent;
  • Reduction in central excise duty on replaceable kits for household type water filters other than those based on RO technology to 4 per cent;
  • Reduction in central excise duty on corrugated boxes and cartons from 8 per cent to 4 per cent;
  • Reduction in central excise duty on latex rubber thread from 8 per cent to 4 percent; and
  • Reduction in excise duty on goods covered under the Medicinal and Toilet Preparations Act from 16 per cent to 10 per cent.
  • Proposals relating to customs and central excise are estimated to result in a net revenue gain of Rs. 43,500 crore for the year.

Service Tax

  • Rate of tax on services retained at 10 per cent to pave the way forward for GST.
  • Certain services, hitherto untaxed, to be brought within the purview of the servicetax levy. These to be notified separately.
  • Process of refund of accumulated credit to exporters of services, especially in the area of Information Technology and Business Process Outsourcing, made easy by making necessary changes in the definition of export of services and procedures.
  • Accredited news agencies which provide news feed online that meet certain criteria, exempted from service tax.
  • Proposals relating to service tax are estimated to result in a net revenue gain of Rs 3,000 crore for the year.
  • Proposals on direct taxes estimated to result in a revenue loss of Rs. 26,000 crore for the year.
  • Proposals relating to Indirect Taxes estimated to result in a net revenue gain of Rs.46,500 crore for the year. Taking into account the concessions being given in the tax proposals and measures taken to mobilise additional resources, the net revenue gain is estimated to be Rs. 20,500 crore for the year.

Budget update 2009- Direct Tax

Budget Update by CA. Sudha Gupta and CA. Vinay Bhushan

Here are the salient features of the Budget 2009

DIRECT TAX

  • Exemption of threshold limit for personal income tax raised by
  • For senior Citizens Rs.15,000 from Rs.2.25 lakh to Rs.2.40 lakh
  • For women tax payers by Rs.10,000 from Rs.1.80 lakh to Rs.1.90 lakh
  • Other categories of individual taxpayers by Rs.10,000 from Rs.1.50 lakh to Rs.1.60 lakh for all

Surcharge of 10% on personal income tax removed.[not for corporate entities ]

  • Threshold limit for payment of wealth tax to be increased from INR 1.5 million to INR 3 million.
  • Fringe Benefit Tax on the value of certain fringe benefits provided by employers to their employees to be abolished
  • Deduction under section 80-DD in respect of maintenance, including medical treatment, of a dependent who is a person with severe disability being raised from the present limit of Rs.75,000/- to Rs.1,00,000/-
  • Deduction under section 80E of the Income-tax Act allowed in respect of interest on loans taken for higher education by an individual extends to any course of study pursued after passing senior secondary examination or its equivalent
  • Section 10 A and Section 10 B [deduction in respect of export profits] extended by one more year i.e. for the financial year 2010-11.
  • Minimum Alternate Tax (MAT) to be increased to 15 % of book profits from 10 %. The period allowed carrying forward the tax credit under MAT to be extended from seven years to ten years.
  • Scope of provisions relating to weighted deduction of 150% on expenditure incurred on in-house R&D to all manufacturing businesses being extended except for a small negative list.
  • Changes in the Rates of Tax Deducted at Source [w.e.f 1st Oct 2009]
Section Nature of Payment Type of Deductee Old Rate New Rate
194 I Rent of plant, machinery or equipment Any 10% 2%
Rent of land building or furniture Individual and HUF 15% 10%
Rent of Land, building or furniture Other than Individual and HUF 20% 10%
194C Payment to contractors Individual or HUF 2% 1%
Payment to contractors Other than Individual or HUF sub contractor 1% 2%
For advertising Other than individual/HUF contractor/sub Contractor 1% 2%
Sub contractor / contractor in transport business Any 1% / 2% nil
  • Commodity Transaction Tax (CTT) to be abolished.
  • Donations to electoral trusts to be allowed as a 100 percent deduction in the computation of the income of the donor.
  • Anonymous donations received by charitable organizations to the extent of 5 percent of their total income or a sum of Rs.1 lakh, whichever is higher, not to be taxed.
  • Presumptive taxation scope to be extended to all small businesses with a turnover upto Rs. 40 lakh. All such taxpayers to have option to declare their income from business at the rate of 8 percent of their turnover and simultaneously enjoy exemption from the compliance burden of maintaining books of accounts. As a procedural simplification, they are also to be exempted from advance tax and allowed to pay their entire tax liability from business at the time of filing their return. This new scheme to come into effect from the financial year 2010-11.
  • Tax holiday under section 80-IB(9) of the Income Tax Act, which was hitherto available in respect of profits arising from the commercial production or refining of mineral oil, to be extended to natural gas. This tax benefit to be available to undertakings in respect of profits derived from the commercial production of mineral oil and natural gas from oil and gas blocks which are awarded under the NELP-VIII round of bidding. The section to be retrospectively amended to provide that “undertaking” for the purposes of section 80-IB(9) will mean all blocks awarded in any single contract.
  • No change in corporate tax rates.
  • LLPs to be taxed in the same manner as general partnerships. Conversion of general partnership to LLP to have no tax implications if rights and obligations remain same and there is no transfer of any asset or liability.
  • Arm’s length price to be the arithmetical mean in cases where more than one price is determined by the most appropriate method. However, if such arithmetical mean is within 5% of the transfer price, then the transfer price declared will be deemed to be the arm’s length price.
  • Weighted deduction of 150% allowed under Section 35 for R&D to be extended to all manufacturers other than those engaged in items specified in the Eleventh Schedule of the Income Tax Act, 1961.
  • Tax holiday under section 80-IB(9) to be extended to natural gas from blocks awarded under the NELP-VIII round of bidding. Definition of “undertaking” to be inserted with retrospective effect from 1 April 2000, to mean all blocks awarded in any single contract by the Government of India in case of mineral oil and natural gas.
  • Taxation of gifts received in excess of INR 50,000 (without consideration or for inadequate consideration) to be extended to immovable property (land and/or building), shares and securities, jewellery, archaeological collections, drawings, paintings, sculptures or any work of art. Stamp duty value in case of immovable property and fair market value in case of movable property to be computed.