ANALYSIS OF UNION BUDGET 2005

ANALYSIS OF UNION BUDGET 2005

Upto Rs 50,000 Nil

Rs 50k – Rs 60k 10%

Rs 60k - Rs 150k 20%

Above Rs 150k 30%

PERSONAL TAX – THE SLABSPERSONAL TAX – THE SLABS

Existing structure Now Proposed

Upto Rs 100,000 Nil

Rs 100k – Rs 150k 10%

Rs 150k - Rs 250k 20%

> Rs 250k 30%

For Women 125 K. Senior Citizen 150 K

• Sec 80 C: Savings Allowance

• Deduction from Gross Total Income.

• Restricted to Rs.100,000 (including Sec.80

CCC & 80 CCD)

• Sectoral Cap u/s Sec.88 withdrawn

• Withdrawal of Standard Deduction,

Rebates & deduction u/s.80L

• Sec.80E substituted for deduction only for

interest on educational loan

SAVINGS AND INVESTMENTS

• Tax rate for domestic companies: 30%

• Surcharge: 10%

• MAT credit introduced

• Depreciation on General Plant: 15%

• Initial Depreciation: 20%

• 10% increase in installed capacity withdrawn

• Deduction as regards payment under VRS

• Discount on zero coupon bonds – deductible

• TDS for technical services: 10%

• Wt deduction of 150% on in house R & D

• Industrial Undertaking in J & K

• 100% deduction of profits of companies carrying on Scientific R & D and approved by DSIR

TERMINAL DATES EXTENDED to 31st March 2007

TRANSACTIONS RELATING TO SECURITIES

• Nominal increase in STT• Trading in derivatives in specified

stock exchanges will not be treated as speculative transaction

FRINGE BENEFIT TAX (FBT)FRINGE BENEFIT TAX (FBT)• Employer to pay tax on Fringe Benefits

• Rate of Tax 30%

• Payable even if there is no IT liability

• Exemptions:• Perks taxable for employee• Travel expenses to and fro place of

work • FBT not allowed as deduction

• Constitutional validity

• Applicability to charitable trust

• Knowledge of business and changing

requirements

• Use of • Health club facilities 50% • Club facilities 50% • Telephone 10% • R & M of Motor Cars and Aircrafts 20%

FRINGE BENEFIT TAX (FBT)FRINGE BENEFIT TAX (FBT)

PROCEDURAL ASPECTS OF (FBT)PROCEDURAL ASPECTS OF (FBT)

• Payment of tax & interest• Filing of return• Assessment / reassessment• Rectification • Revision• Appeal• Penalty

BANKING CASH TAX• Why • What Cash > Rs.10 K on a single day DD > Rs.10 K on a single day Cash receipt > Rs.10 K on a single

day on encashment of term deposit

• How much @ 0.1% of transaction

• WhoBank to collect and pay the tax

FM ASKS:

“ Why are you guys so worried about cash withdrawals?

I am becoming increasingly interested in that.”

BANKING CASH TAX

• Constitutional validity?• Practical examples

Withdrawal for Purchase of property Medical expenses on an emergency Meeting deadlines to comply with tender requirements

BANKING CASH TAX

• Administrative Difficulties• Increase in bank transactions • Increase in work load of banks• Procedural compliance to collect and

pay tax

BANKING CASH TAX

Indian Inc – Most Favoured Nation

why?

Inflation under control

Comfortable Foreign exchange reserves

Proportion of Direct & Indirect Taxes

Emphasis given for manufacturing agriculture and infrastructure

Thrust for Foreign Direct Investment

Reduction in tax rates

Savings in tax - flexibility in investments

Introduction of VAT

Stock Market Reactions

India a favoured destination

Indian Inc – Most Favoured Nation

why?

Required Action

Steps to be taken to widen tax base

Changes required in FBT and BCTT

Action taken report