·Personal income tax exemption limit to be enhanced by Rs 15,000 and Rs 10,000 for senior citizens and other individuals, respectively. Surcharge to be removed for all non-corporate assesses.
·No change in corporate tax rates.
·MAT rate to be increased to 15% of book profits from 10%.
·Threshold limit for payment of wealth tax to be increased to Rs 30 lakh
[Clauses 2, 45, 82 and First Schedule]
Extension of sunset clause for STPI/EoUs
Benefit of tax holiday to export oriented units (EoUs) under Section 10A and Section 10B extended by one year. It would now be available up to assessment year 2011-12.
[Clauses 5, 7]
Tax holiday for SEZ units
The method of computation of eligible profits as a proportion of export turnover to the total turnover of the taxpayer, instead of the total turnover of the SEZ (special economic zone) undertaking, was discriminatory and is now sought to be corrected prospectively.
Discontinuation of Fringe Benefit Tax (FBT)
FBT to be abolished. Consequently, taxation in respect of following specified benefits would be levied in the hands of employee as perquisites:
a) Allotment or transfer of specified security or sweat equity shares by an employer to its employees. Perquisite value shall be the difference between Fair Market Value (FMV) of the security/shares on the date on which the option is exercised and the amount actually paid by/recovered from the employee.
b) Contribution in excess of Rs 100,000 by an employer to an approved superannuation fund for employees.
c) Other fringe benefits as prescribed.
[Clauses 9, 23, 48]
Commodities Transaction Tax
Commodity transaction tax abolished (Effective from assessment year 2009-2010 onwards).
Deduction of interest on loan taken for higher education
Definition of higher education for deduction in respect of interest paid on loan for purposes of higher education to be widened to include any course of study pursued after passing senior secondary examination or its equivalent from recognised institutions.
Enhancement of deduction for medical treatment of dependent
Deduction to be enhanced in respect of maintenance of dependent with severe disability from Rs 75,000 to Rs 100,000.
Extension for setting-up undertakings in power sector
Tax holiday available to an undertaking set up for purpose of reconstruction or revival of a power generating plant to be extended to undertakings set-up by March 31, 2011 (Effective assessment year 2009-10 onwards).
Extension of weighted deduction for in-house scientific research and development
The scope of claiming a weighted deduction of 150 per cent of the expenditure incurred on in-house scientific research and development expanded to include companies engaged in manufacture or production of any article or thing, except those specified in Schedule Eleven of the Income Tax Act.
Deduction for undertakings engaged in commercial production of mineral oil and natural gas
Refineries in private sector which commence refining of mineral oil before April 1 2012 are also eligible for tax holiday.
Tax holiday has also been extended to undertakings engaged in commercial production of natural gas, provided the blocks are licensed under NELP-VIII and the production commences on or after April 1, 2009.
Special provisions for presumptive taxation of small businesses
·Scheme of presumptive taxation made applicable to all businesses (except for plying, hiring or leasing goods carriages or those claiming specified tax benefits) having total turnover/gross receipts of less than Rs 40 lakh.
·8 percent of total turnover/gross receipts will be deemed to be the taxable income of the taxpayer and complete tax liability can be deposited by way of self assessment tax. Such tax payers also exempted from maintaining audited accounts.
·Presumptive tax regime available to individuals, HUF, partnership firm (not an LLP firm) who/which is a resident .
·The presumptive income of truck owners covered under section 44AE sought to be enhanced.
[Clauses 18, 19, 20, 21, 22]
Increase in limit for disallowance of payments made to transporters
Considering special circumstances of transport operators for incurring expenditure on long-haul journeys, limit for payments, otherwise than by an account payee cheque or account payee bank draft to be raised from Rs 20,000 to Rs 35,000 per transaction per day (Effective October 1, 2009 onwards). [Clause 16]
Transfer Pricing Amendments
·Arm's length price is defined to mean the arithmetical mean of prices determined under the most appropriate method. It is sought to be clarified that, where the said arithmetical mean is not within 5% of the transfer price declared by the taxpayer, an adjustment to the extent of difference between the arithmetical mean and transfer price adopted by the taxpayer would be made (Effective in respect of TP assessments completed after October 1, 2009).
·Safe harbour rules proposed to provide for circumstances in which the authorities will accept the transfer price declared by the taxpayer (Effective assessment year 2009-10 onwards).
·Creation of Alternate Dispute Resolution panel to deal with disputes pertaining to transfer pricing and taxation of foreign companies proposed from October 1, 2009.
[Clauses 40, 41, 49, 55, 71, 72]
Investment-linked tax incentive scheme
A deduction of 100% of capital expenditure (excluding land, goodwill, and financial instrument) proposed to incentivise setting up and operating following specified businesses:
(a) cold chain facilities for specified products (should be set-up on or after April 1, 2009);
(b) warehousing facilities for storage of agricultural produce (should be set-up on or after April 1, 2009);
(c) cross-country natural gas or crude or petroleum oil pipeline network for distribution, including storage facilities being an integral part of such network (should be set-up on or after April 1, 2007).
Losses on account of aforesaid deduction can be set-off from profits of such business only and can be carried forward indefinitely.
[Clauses 10, 13, 17, 24, 28]
Transactions without consideration or inadequate consideration considered as income
Currently, gifts in kind are not subject to tax. It is proposed that, subject to certain exceptions, value of property received in excess of Rs 50,000 without consideration/inadequate consideration shall be taxable as 'Income from Other Sources' (this will be effective from October 1, 2009 onwards).
Minimum Alternate Tax ('MAT')
·Provision for diminution in value of any asset to be added back for computing book profits for purposes of MAT (Effective assessment year 1998-1999).
·Period of availing MAT credit increased from seven to ten years.
[Clause 43, 44 and 45]
Simplifying Tax Administration Procedures
·Revenue authorities to allot and quote Document Identification Number for every notice, letter, order, correspondence.
·Centralised Processing Centre to be set-up at Bangalore to ensure faster processing of tax returns.
·Service of notice, summon, requisition, order or any other communication may be made in prescribed manner including electronic mode.
Enhancement of limit for payment of advance tax
Threshold limit for payment of advance tax increased from Rs 5,000 to Rs 10,000.
Taxation of Limited Liability Partnership (LLP)
Taxability of LLPs and their partners put on par with general partnership firm, ie taxation in hands of the entity and exempt in hands of partners.
[Clauses 3, 53 and 58]
Rationalisation of provisions relating to tax deduction at source ('TDS')
·TDS on rental payments for use of plant machinery or equipment and use of land building, furniture or fittings reduced to 2% and 10%, respectively.
·TDS on contractual payments proposed at 1%, where payee is an individual/and 2% in other cases. Lower rate of 1% in case of payments to sub-contractor/advertising contracts removed.
·No TDS on payments to transporters who furnish PAN details to deductors.
·Surcharge and cess not to be levied on tax deducted from payments, other than salaries, made to residents (Effective October 1, 2009 onwards).
·Time limits of two and four years prescribed for passing verification orders in the case of TDS matters.
·Failure to quote PAN shall result in tax deduction at higher of rate specified under relevant provisions or 20%, with effect from April 1, 2010.
[Clauses 16, 60, 61, 65, 68