DIRECT TAXES
IT exemption limit for individuals raised
To bring tax rates closer to DTC rates, the exemption limit for the general category of individual taxpayers has been raised from Rs 160,000 to Rs 180,000. This measure will provide a uniform tax relief of Rs 2,000 to every taxpayer of this category.
Sops for senior citizens
For senior citizens, the qualifying age has been reduced from 65 years to 60 years; the exemption limit enhanced from Rs 2.40 lakh to Rs 2.50 lakh; and a new category of Very Senior Citizens (80 years and above) created who will be eligible for a higher exemption limit of Rs 5 lakh.
Corporate tax surcharge cut
The surcharge of 7.5 per cent on domestic companies has been reduced to 5 per cent. The rate of Minimum Alternate Tax (MAT) has been raised from 18 per cent of book profits to 18.5 per cent, to keep the effective rate of MAT at the same level. MAT will be levied on developers of Special Economic Zones as well as units operating in SEZs.
Infra debt funds to be created
To attract foreign funds for financing of infrastructure, special vehicles will be created in the form of infrastructure debt funds; interest payments on the borrowings of these funds will be taxed at 5 per cent instead of the current 20 per cent; and the income of the fund will be exempt from tax.
Tax benefit for infra bonds extended
The additional deduction of Rs 20,000 for investment in long-term infrastructure bonds, notified by the Central government in 2010-11, has been extended for one more year.
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Lower tax on dividends from foreign arms
For the year 2011-12, dividends received by an Indian company from its foreign subsidiary will be taxed at a lower rate of 15 per cent, to provide these funds an incentive to flow to India.
Tax breaks for investment in housing
Businesses which develop affordable housing under a scheme to be notified will be allowed an investment-linked deduction.
Incentives for innovation
The weighted deduction on payments made to national laboratories, universities and institutes of technology, for scientific research, has been enhanced from 175 per cent to 200 per cent.
Information collection to be strengthened
In order to strengthen the system of collection of information from foreign tax jurisdictions, measures to discourage transactions with entities located in non-cooperative jurisdictions will be notified.
INDIRECT TAXES
130 items brought under Central excise
Of the 370 items that enjoy exemption from Central excise duty but are chargeable to VAT, 130 that are mainly in the nature of consumer goods will be subject to a nominal Central excise duty of 1 per cent. Basic food and fuel will continue to be exempt. The remaining 240 items will be brought into the tax net when GST is introduced.
Lower excise duty rate raised
To keep in step with states, most of whom have increased their merit rate of VAT from 4 per cent to 5 per cent, the lower rate of Central excise duty has been increased from 4 per cent to 5 per cent.
Excise on ready-mades mandatory
Branded ready-made garments and made-ups of textiles, currently under an optional excise duty regime, will be subject to a mandatory levy at a unified rate of 10 per cent.
Peak Customs duty remains 10%
Peak customs duty will be retained at 10 per cent, in view of continued uncertainties in the global economy. However, some rationalisation is being done to unify three rates namely, 2 per cent, 2.5 per cent and 3 per cent at the middle level of 2.5 per cent.
Boost for cold chain equipment
Full exemption from excise duty is being extended to air-conditioning equipment and refrigeration panels for cold chain infrastructure. Conveyor belts used in cold storages, mandis and warehouses will also be fully exempt from excise duty.
Customs duty on farm machinery cut
The basic customs duty of 5 per cent on specified agricultural machinery has been reduced to 2.5 per cent. The concession is also being extended to parts of such machinery to encourage domestic production.
Customs duty on raw silk cut
To encourage domestic value addition vis-a-vis imports, the basic customs duty has been reduced on raw silk; certain textile intermediates and inputs for chemicals, ferro-alloys and paper; specified inputs for manufacture of technical fibre and yarn; as well as on specified raw material for the manufacture of syringes and needles.
20% export duty on iron ore
The export duty on iron ore has been raised and unified at 20 per cent ad valorem. Full exemption from export duty is being provided to iron ore pellets to encourage the value addition process for fines.
Relief for cement industry
The basic customs duty on two critical raw materials of the cement industry (petcoke and gypsum) has been reduced to 2.5 per cent.
Cash dispensers exempt from Customs duty
To drive the financial inclusion agenda of the Government, cash dispensers will be fully exempt from basic customs duty. Full exemption is also being extended to parts of such machines to encourage their domestic production.
10% excise on fuel cell vehicles
The concessional excise duty of 10 per cent has been extended to vehicles based on hydrogen cell technology. Specified parts of hybrid vehicles have been granted full exemption from basic customs duty and special CVD. In addition, a concessional rate of excise duty of 5 per cent is being prescribed to incentivise their domestic production.