Thursday, March 11, 2010

Budget 2010 Part-2

The Centralized Processing Centre at Bengaluru is now fully functional and is
processing around 20,000 returns daily. This initiative will be taken forward by
setting up two more Centres during the year.
The Income Tax department has introduced “Sevottam”, a pilot project at Pune,
Kochi and Chandigarh through Aayakar Seva Kendras, which provide a single window
system for registration of all applications including those for redressal of grievances
as well as paper returns. The scheme will be extended to four more cities in the year.
Automation of Central Excise & Service Tax, has already been rolled out throughout
the country this year. Similarly, a Mission Mode Project for computerization of
Commercial Taxes in States has been approved recently. With an outlay of
Rs. 1133 crore of which the Centre’s share is Rs. 800 crore, the project will lay the
foundation for the launch of GST.
The income tax department to notify SARAL-II form for individual salaried
taxpayers for the coming assessment year.
Scope of cases which may be admitted by the Settlement Commission expanded to
include proceedings related to search and seizure cases pending for assessment.
Scope of Settlement Commission also expanded in respect of Central Excise and
Customs to include certain categories of cases that hitherto fell outside its
Bi-lateral discussions commenced to enhance the exchange of bank related and
other information to effectively track tax evasion and identify undisclosed assets
of resident Indians lying abroad.
Direct Taxes
Income tax slabs for individual taxpayers to be as follows
Income upto Rs 1.6 lakh Nil
Income above Rs 1.6 lakh and upto Rs. 5 lakh 10 per cent
Income above Rs.5 lakh and upto Rs. 8 lakh 20 per cent
Income above Rs. 8 lakh 30 per cent
Deduction of an additional amount of Rs. 20,000 allowed, over and above the
existing limit of Rs.1 lakh on tax savings, for investment in long-term infrastructure
bonds as notified by the Central Government
Besides contributions to health insurance schemes which is currently allowed as a
deduction under the Income-tax Act, contributions to the Central Government Health
Scheme also allowed as a deduction under the same provision.
Current surcharge of 10 per cent on domestic companies reduced to 7.5 per cent.
Rate of Minimum Alternate Tax (MAT) increased from the current rate of 15 per
cent to 18 per cent of book profits.
To further encourage R&D across all sectors of the economy, weighted deduction
on expenditure incurred on in-house R&D enhanced from 150 per cent to 200 per
cent. Weighted deduction on payments made to National Laboratories, research
associations, colleges, universities and other institutions, for scientific research
enhanced from 125 per cent to 175 per cent.
Payment made to an approved association engaged in research in social sciences
or statistical research to be allowed as a weighted deduction of 125 per cent. The
income of such approved research association shall be exempt from tax.
Benefit of investment linked deduction under the Act extended to new hotels of
two-star category and above anywhere in India to boost investment in the tourism
Allow pending projects to be completed within a period of five years instead of
four years for claiming a deduction of their profits, as a one time interim relief to
the housing and real estate sector. Norms for built-up area of shops and other
commercial establishments in housing projects to be relaxed to enable basic facilities
for their residents.
Limits for turnover over which accounts need to be audited enhanced to Rs. 60
lakh for businesses and to Rs. 15 lakh for professions.
Limit of turnover for the purpose of presumptive taxation of small businesses
enhanced to Rs. 60 lakh.
If tax has been deducted on payment by way of any expense and is paid before the
due date of filing the return, such expenditure to be allowed for deduction. Interest
charged on tax deducted but not deposited by the specified date to be increased
from 12 per cent to 18 per cent per annum.
To facilitate the conversion of small companies into Limited Liability Partnerships,
transfer of assets as a result of such conversion not to be subject to capital gains
“The advancement of any other object of general public utility” to be considered as
“charitable purpose” even if it involves carrying on of any activity in the nature of
trade, commerce or business provided that the receipts from such activities do not
exceed Rs.10 lakh in the year .
Proposals on direct taxes estimated to result in a revenue loss of Rs. 26,000 crore
for the year.
Indirect Taxes
Rate reduction in Central Excise duties to be partially rolled back and the standard
rate on all non-petroleum products enhanced from 8 per cent to 10 per cent
ad valorem.
The specific rates of duty applicable to portland cement and cement clinker also
adjusted upwards proportionately. Similarly, the ad valorem component of excise
duty on large cars, multi-utility vehicles and sports-utility vehicles increased by 2
percentage points to 22 per cent.
Restore the basic duty of 5 per cent on crude petroleum; 7.5 per cent on diesel and
petrol and 10 per cent on other refined products. Central Excise duty on petrol and
diesel enhanced by Re.1 per litre each.
Some structural changes in the excise duty on cigarettes, cigars and cigarillos to be
made coupled with some increase in rates. Excise duty on all non-smoking tobacco
such as scented tobacco, snuff, chewing tobacco etc to be enhanced. Compounded
levy scheme for chewing tobacco and branded unmanufactured tobacco based on
the capacity of pouch packing machines to be introduced.
Agriculture & Related Sectors
Provide project import status with a concessional import duty of 5 per cent for the
setting up of mechanised handling systems and pallet racking systems in ‘mandis’
or warehouses for food grains and sugar as well as full exemption from service tax
for the installation and commissioning of such equipment.
Provide project import status at a concessional customs duty of 5 per cent with full
exemption from service tax to the initial setting up and expansion of
♦Cold storage, cold room including farm pre-coolers for preservation or storage
of agriculture and related sectors produce ; and
♦Processing units for such produce.
Provide full exemption from customs duty to refrigeration units required for the
manufacture of refrigerated vans or trucks.
Provide concessional customs duty of 5 per cent to specified agricultural machinery
not manufactured in India;
Provide central excise exemption to specified equipment for preservation, storage
and processing of agriculture and related sectors and exemption from service tax
to the storage and warehousing of their produce; and
Provide full exemption from excise duty to trailers and semi-trailers used in
Concessional import duty to specified machinery for use in the plantation sector to
be, extended up to March 31, 2011 along with a CVD exemption.
To exempt the testing and certification of agricultural seeds from service tax.
The transportation by road of cereals, and pulses to be exempted from service tax.
Transportation by rail to remain exempt.
To ease the cash flow position for small-scale manufacturers, they would be
permitted to take full credit of Central Excise duty paid on capital goods in a single
installment in the year of their receipt. Secondly, they would be permitted to pay
Central Excise duty on a quarterly, rather than monthly, basis.
To build the corpus of the National Clean Energy Fund, clean energy cess on coal
produced in India at a nominal rate of Rs.50 per tonne to be levied. This cess will
also apply on imported coal.
Provide a concessional customs duty of 5 per cent to machinery, instruments,
equipment and appliances etc. required for the initial setting up of photovoltaic
and solar thermal power generating units and also exempt them from Central Excise
duty. Ground source heat pumps used to tap geo-thermal energy to be exempted
from basic customs duty and special additional duty.
Exempt a few more specified inputs required for the manufacture of rotor blades
for wind energy generators from Central Excise duty.
Central Excise duty on LED lights reduced from 8 per cent to 4 per cent at par with
Compact Fluorescent Lamps.
To remedy the difficulty faced by manufacturers of electric cars and vehicles in
neutralising the duty paid on their inputs and components, a nominal duty of 4 per
cent on such vehicles imposed. Some critical parts or sub-assemblies of such
vehicles exempted from basic customs duty and special additional duty subject to
actual user condition. These parts would also enjoy a concessional CVD of 4 per
A concessional excise duty of 4 per cent provided to “soleckshaw”, a product
developed by CSIR to replace manually-operated rickshaws. Its key parts and
components to be exempted from customs duty.
Import of compostable polymer exempted from basic customs duty.
Project import status to ‘Monorail projects for urban transport’ at a concessional
basic duty of 5 per cent granted.
To allow resale of specified machinery for road construction projects on payment
of import duty at depreciated value.
To encourage the domestic manufacture of mobile phones accessories, exemptions
from basic, CVD and special additional duties are now being extended to parts of
battery chargers and hands-free headphones. The validity of the exemption from
special additional duty is being extended till March 31, 2011.
Medical Sector
Uniform, concessional basic duty of 5 per cent, CVD of 4 per cent with full
exemption from special additional duty prescribed on all medical equipments. A
concessional basic duty of 5 per cent is being prescribed on parts and accessories
for the manufacture of such equipment while they would be exempt from CVD
and special additional duty.
Full exemption currently available to medical equipment and devices such as
assistive devices, rehabilitation aids etc. retained. The concession available to
Government hospitals or hospitals set up under a statute also retained.
Specified inputs for the manufacture of orthopaedic implants exempted from import
To address the difficulties experienced by film industry in importing digital masters
of films for duplication or distribution loaded on electronic medium vis-a-vis those
imported on cinematographic film, owing to a differential customs duty structure,
customs duty to be charged only on the value of the carrier medium. The same
dispensation would apply to music and gaming software imported for duplication.
In all such cases the value representing the transfer of intellectual property rights
would be subjected to service tax.
Provide project import status at a concessional customs duty of 5 per cent with full
exemption from special additional duty to the initial setting up “Digital Head End”
equipment by multi-service operators.
Precious Metals
Rates on precious metals indexed as follows:
♦On gold and platinum from Rs.200 per 10 grams to Rs.300 per 10 grams
♦On silver from Rs.1,000 per kg to Rs.1,500 per kg.
Basic customs on Rhodium – a precious metal used for polishing jewellery reduced
to 2 per cent.
Basic customs duty on gold ore and concentrates reduced from 2 per cent ad valorem
to a specific duty of Rs.140 per 10 grams of gold content with full exemption from
special additional duty. Further, the excise duty on refined gold made from such
ore or concentrate reduced from 8 per cent to a specific duty of Rs.280 per 10
Other Proposals
Full exemption from import duty available to specified inputs or raw materials
required for the manufacture of sports goods expanded to cover a few more items.
Basic customs duty on one of key components in production of micro-wave ovens,
namely magnetrons, reduced from 10 per cent to 5 per cent.
Value limit of Rs. 1 lakh per annum on duty-free import of commercial samples as
personal baggage enhanced to Rs. 3 lakh per annum.
Outright exemption from special additional duty provided to goods imported in a
pre-packaged form for retail sale. This would also cover mobile phones, watches
and ready-made garments even when they are not imported in pre-packaged form.
The refund-based exemption is also being retained for cases not covered by the
new dispensation.
Toy balloons fully exempted from Central Excise duty.
Reduction in basic customs duty on long pepper from 70 per cent to 30 per cent;
Reduction in basic customs duty on asafoetida from 30 per cent to 20 per cent;
Reduction in central excise duty on replaceable kits for household type water filters
other than those based on RO technology to 4 per cent;
Reduction in central excise duty on corrugated boxes and cartons from 8 per cent
to 4 per cent;
Reduction in central excise duty on latex rubber thread from 8 per cent to 4 per
cent; and
Reduction in excise duty on goods covered under the Medicinal and Toilet
Preparations Act from 16 per cent to 10 per cent.
Proposals relating to customs and central excise are estimated to result in a net
revenue gain of Rs. 43,500 crore for the year.
Service Tax
Rate of tax on services retained at 10 per cent to pave the way forward for GST.
Certain services, hitherto untaxed, to be brought within the purview of the service
tax levy. These to be notified separately.
Process of refund of accumulated credit to exporters of services, especially in the
area of Information Technology and Business Process Outsourcing, made easy by
making necessary changes in the definition of export of services and procedures.
Accredited news agencies which provide news feed online that meet certain criteria,
exempted from service tax.
Proposals relating to service tax are estimated to result in a net revenue gain of Rs
3,000 crore for the year.
Proposals on direct taxes estimated to result in a revenue loss of Rs. 26,000 crore
for the year. Proposals relating to Indirect Taxes estimated to result in a net revenue
gain of Rs.46,500 crore for the year. Taking into account the concessions being
given in the tax proposals and measures taken to mobilise additional resources, the
net revenue gain is estimated to be Rs. 20,500 crore for the year.



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