Budget 2008-09

Satish R Nair KH08JUNMBA98Batch XIII-B

Prof. Hardic Mehta

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Direct Tax ProposalsDirect Tax Proposals

““To tax and to please, no more than to To tax and to please, no more than to love and to be wise, is not given to love and to be wise, is not given to men,”men,” Edmund BurkeEdmund Burke

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AgendaAgenda

Financial Bill, 2008 Look at some of the

major changes proposed in the budget

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HighlightsHighlights

• Change in tax structure for Individuals• No change in the tax rates for Companies• Tax on Short term capital gains for securities

increased to 15 %• BCCT withdrawn• Minor modifications to provisions related to

FBT and Minimum Alternate Tax • Amendment to certain procedural issues• Proposal that affirm or nullify court decisions

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IndividualsIndividuals

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Tax RatesTax Rates

• For individuals

• For senor citizens Rs.225,000• For Women tax payers Rs. 180,000

Upto 150,000 NIL

150,000 – 300000 10 %

300,000 – 500000 20 %

Above 500,000 30 %

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Net EffectNet Effect

Income 500000 1000000 1500000

Current 101,970 256,470 452,067

Proposed

56,650 211,150 402,215

Tax saving

45,320 45,320 49,852

percentage

44 18 11

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Senior CitizensSenior Citizens

• Transfer of capital asset by a senior citizen in a reverse mortgage notified scheme will not attract capital gains

• Investments made as a five year Time Deposits in an account under the Post Office and in an account under the Senior Citizen Savings Scheme Rules, 2004 are eligible for deduction under section 80C within the overall limit of Rs. 100,000.

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Medical InsuranceMedical Insurance

• Additional deduction will be allowed to an individual up to Rs. 15,000 (Rs. 20000 for seinor citizen) for payment of health insurance premium of parents whether dependent or not).

• Present deduction of RS.15000 also continues

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Corporate SectorCorporate Sector

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Tax RatesTax Rates

Corporate Tax• There are no changes in the tax rates,

surcharge and education cess.

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Dividend Distribution taxDividend Distribution tax

• The amount of dividend declared by the parent company

will be reduced by the amount of dividend received from its subsidiary company for the purposes of computing DDT payable by the parent company if:

• - such dividend is received from its subsidiary;• - the subsidiary has paid DDT on such

dividend; and• - the parent company is not a subsidiary of

any other company.

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BCCTBCCT

• Banking Cash Transaction Tax levied at 0.1 percent on ’taxable banking transaction’ is withdrawn.

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Provisions affecting allProvisions affecting all

• Short term capital gains tax on securities raised from 10 % to 15%

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DeductionsDeductions

• Behind every exemption / deduction there is lobbying

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Tax DeductionsTax Deductions

• Tax holiday extended to undertaking engaged in operating and maintaining new hospital located anywhere in India, other than an excluded area, for a consecutive period of five years. **

• Tax holiday extended to undertaking engaged in the business of hotel located in specified districts having a World Heritage Site for a consecutive period of five years.

• Expenses for outsourcing R and D to an eligible approved scientific research company will qualify for weighted deduction of 125 %. However, the company rendering such services will not be eligible to claim weighted deduction.

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DeductionsDeductions

• Deduction for specified preliminary expenses for setting-up of a new unit also made available to service sector over five years.

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MISCMISC

• Payment or aggregate of payments made to a person in a day, otherwise than by an account payee cheque or account payee bank draft, in excess of Rs. 20,000 will be chargeable to tax.

• Tax benefits will not be available to an undertaking engaged in refining of mineral oil if it begins refining after 31 March 2009

• Agriculture will include seedlings and saplings grow in a nursery.

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FBTFBT

• Any expenditure on or payment made for maintenance of any accommodation in the nature of a guest house

• The valuation of expenditure on or payment for festival celebrations to be reduced from 50 percent to 20 percent

•.

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FBTFBT

A few rationalization • Items excluded from FBT under Employee

Welfare:- crèche facility for the children of the employee- sponsoring a sportsman being an employee; and- organizing sports events for employees.

• Any expenditure incurred on or payment through non-transferable pre-paid electronic meal card usable only at eating joints or outlets is excluded from levy of FBT

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Minimum Alternate TaxMinimum Alternate Tax

MAT• Book profit’ to be increased by deferred tax

and provision thereof: • Dividend Distribution Tax (DDT); tax on

distributed income to unit holders; interest chargeable under income-tax law; surcharge levied by Central Acts; education cess on income-tax; if debited to profit and loss account will be added back.

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STTSTT

• STT would be eligible for tax deduction provided income from taxable securities transactions is included under the head profits and gains of business and profession.

• Consequently, tax rebate for STT is withdrawn.

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CTT : Commodities TTCTT : Commodities TT

• Transaction Rates Payable By• Sale of an option in goods or an option in

commodity derivative : 0.017% Seller• Sale of an option in goods or an option in

commodity derivative, where option is exercised 0.125% Purchaser

• Sale of any other commodity derivative :

0.017% Seller

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Direct TaxDirect Tax

Procedural changes

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Procedural changesProcedural changes

• Due date for filing of corporate tax returns and income-tax returns advanced to 30 September instead of 31 October.

• Consequently, the relevant due date for filing a wealth tax return, FBT return, transfer pricing report and other supporting documents would also stand advanced

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Procedural changesProcedural changes

• Two-stage assessment of returns re-introduced. Initial stage assessment would require computerized processing

. • Notice for scrutiny assessment to be served

on the taxpayer within a period of 6 months from the end of the financial year in which the return is furnished instead of 12 months.

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Procedural changesProcedural changes

• Notice for scrutiny assessment to be served on the tax payer within a period of 6 months from the end of the financial year in which the return is furnished instead of 12 months.

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Other major changesOther major changes

• Change in the definition of the term charitable purpose– To exclude trade or business activities

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Thank youThank you