Budget in 2 minutes

DIRECT TAXES

Personal income tax exemption limit has been increased for small and marginal taxpayers and senior citizens. The personal income tax exemption limit for senior citizens has gone up by Rs15,000, from Rs 2.25 lakh to Rs 2.40 lakh.

 

For women, the exemption limit has been raised by Rs 10,000 — from Rs 1.80 lakh to Rs 1.90 lakh. For all other categories of individual players, the personal income tax limit has been raised by Rs 10,000 from Rs 1.50 lakh to Rs 1.60 lakh.

 

The surcharge on direct taxes, usually levied to meet the revenue needs arising from natural calamities, will be phased out. The 10 per cent surcharge on personal income tax has been removed.

 

To simplify tax returns, the government is working on early introduction for SARAL-II.

 

To tide over the slowdown in exports, the tax holiday for the sector has been increased by a year to include 2010-11.

 

The Fringe Benefit Tax introduced in 2005 on the value of certain fringe benefits given by the employer to his employees has been abolished.

 

Individuals enjoy tax concessions on the interest for loans taken for higher education which means full time studies for any graduate or post-graduate courses in engineering, medicine, management or for post-graduate course in applied sciences or pure sciences, including mathematics and statistics. Exemptions will now be granted for loans taken for vocational studies after finishing school. The amendment will be applicable from April 2010.

 

In order to incentivise the corporate sector to undertake Research & Development work, the current provision of weighted deduction of 150 per cent on expenditure incurred on in-house R&D has been extended to many other manufacturing businesses.

 

Businesses setting up cold chains, ware-housing facilities for storing agricultural produce, laying and operating cross-country natural gas, crude or petroleum oil pipelines, will enjoy investment-linked tax incentives. All capital expenditure, other than expenditure on land, goodwill and financial instruments, will be fully allowable as deduction.

 

The rate of Minimum Alternate Tax (MAT) has been increased to 15 per cent of book profits from the present rate of 10 per cent. The Commodity Transaction Tax has been abolished.

 

Donations to electoral trusts will be allowed as a 100 per cent deduction in the computation of the income of the donor.

 

Tax concessions are in the offing for trusts engaged in preserving and improving the environment, monuments and places or objects of artistic or historic interest. They will be treated on par with trusts engaged in charitable activities like education and relief to the poor.

 

The new Direct Taxes Code will be released in the next 45 days. The Direct Taxes Code, along with a Discussion will be released to the public for debate. Based on the inputs received, the Government will finalise the Direct Taxes Code Bill for introduction in the House during the Winter Session.

 

To enhance efficiency in tax administration, the merger of the two Authorities for Advance Rulings on Direct and Indirect Taxes by amending the relevant Acts has been proposed. This will enable the Authority for Advance Rulings, set up under Section 245-O of the Income Tax Act, 1961 to also function as the Authority for Advance Rulings for Indirect Taxes.

INDIRECT TAXES Customs duties

Customs duty on gold bars and gold coins has gone up from Rs 100 per 10 gram to Rs 200 per 10 gram. On other forms of gold, the duty has gone up from Rs 250 per 10 gram to Rs 500 per gram.

 

Customs duty on silver has doubled from the current Rs 500 per kg. The rate increase will also be applicable when gold and silver (including ornaments) are imported as personal baggage.

 

In the healthcare segment, customs duty on 10 specified life-saving drugs, vaccine and their bulk drugs has been reduced from 10 per cent to 5 per cent. The list includes the influenza vaccine and drugs used for the treatment of breast cancer, hepatitis-B and rheumatic arthritis, among other ailments.

 

Customs duty will also be reduced from 7.5 per cent to 5 per cent on two specified life-saving devices used in the treatment of heart conditions. These devices will be fully exempt from excise duty and CVD, also.

 

Among electronics devices, set top boxes will cost more as five per cent customs duty has been imposed on these digital boxes used in the television broadcasting industry.

 

The duty on LCD panels for manufacture of LCD TVs has been reduced from 10 per cent to 5 per cent.

 

Mobile phones manufacturers will continue to enjoy full exemption from CVD of 4 per cent on import of accessories, parts and components for another year.

 

The basic customs duty on permanent magnets — a critical component for Wind Operated Electricity Generators — has been reduced from 7.5 per cent to 5 per cent.

 

In the energy sector, customs duty on bio-diesel has been reduced from 7.5 per cent to 2.5 per cent.

 

Customs duty on cotton and wool waste has been reduced from 15 per cent to 10 per cent.

 

Inflatable rafts, snow-skis, surf boats, sail boards and other water sports equipment have been fully exempted from duty.

INDIRECT TAXES CENTRAL EXCISE

The excise duty rate on items currently attracting 4 per cent duty has been increased to 8 per cent except in the case of specified food items like biscuits, cakes, pastries and sherbets. The list includes drugs and pharmaceutical products falling under Chapter 30, certain varieties of paper, paperboard, power driven pumps for handling water, pressure cookers, compact fluorescent lamps and cars for physically handicapped persons.

 

In the automobile sector, excise duty applicable on large cars, utility vehicles of engine capacity 2,000 cc and above has been reduced from Rs 20,000 per vehicle to Rs 15,000 per vehicle

 

Duty on petrol driven trucks and lorries has been reduced from 20 per cent to 8 per cent.

 

Excise duty on man-made fibre and yarn, PTA and DMT, polyster chips and acrylonitrile has been increased from 4 per cent to 8 per cent.

 

Bio-diesel, obtained from vegetable oils and used for blending with petro-diesel, is currently exempt from excise duty. Petro-diesel blended with bio-diesel will be fully exempt from excise duty.

 

Excise duty on Special Boiling Point Spirits has been reduced to 14 per cent.

 

Excise duty on naphtha has been reduced to 14 per cent.

 

Branded jewellery has been fully exempted from excise duty.

 

In indirect taxes, the Goods and Services Tax (GST) will be introduced with effect from April 1, 2010.

SERVICE TAX

Exemption from service tax is being provided to the Federation of Indian Export Organisations and specified Export Promotion Councils. They have been exempted from service tax on the membership and other fees collected by them. The exemption is valid till March 2010.

 

Inter-bank purchase and sale of foreign currency between scheduled banks is being provided exemption from service tax.

 

Services received by exporters from goods transport agents and commission agents, where the liability to pay service tax is ab initio on the exporter, would be exempted from service tax. There would be no need for the exporter to first pay the tax and later claim refund.

 

In the goods transport sector, service tax is levied on transport of goods by road, by air, through pipelines and in containers but not on goods carried by the Indian Railways or those carried as coastal cargo or through inland waterways. Service tax will now be levied on these modes of goods transport. The new levy is not likely to impact the prices of essential commodities or goods for mass consumption as suitable exemptions would be provided.

 

Services provided by chartered accountants, cost accountants, and company secretaries as well as by engineering and management consultants are taxed. Now service tax will be levied on advice, consultancy or technical assistance provided in the field of law.

 

Service tax is also being levied on cosmetic and plastic surgery services.

 

The definition of stock-broker (in stock-broker service) is being amended to exclude sub-broker from its ambit. As a consequence, sub-brokers will be outside the purview of service tax.

 

Exemption from service tax is being provided to inter-state or intra-state transportation of passengers in a vehicle bearing “contract carriage permit” with specified conditions.