Budget 2009 - Highlights

DIRECT TAX

Individual Taxation

· Ceiling limit for

o Men – 1.60 lakhs (increase from Rs.1.50 lakhs)

o Women – 1.90 lakhs (increase from Rs.1.80 lakhs)

o Senior Citizens – Rs.2.40 lakhs (increase from Rs.2.25 lakhs)

· Surcharge removed for Individuals

· Meaning of perquisite in salary to include value of any specified security or sweat equity shares allotted or transferred directly or indirectly by the employer/former employer free of cost or at a concessional rate.

· Perquisite will also include amount of any contribution to an approved super annuation fund by the employer in excess of Rs. One lakh.

· Gift in kind whose fair market value (other than immoveable property) exceeds Rs.50000 or the difference between the consideration and the fair market value exceeds Rs50000 will be taxed in the hands of the recipient. (from 1^st October 2009)

· Benefit of 80DD increased to Rs. 100000

· Benefit of 80E – Interest on educational loans extended to vocational training courses

Corporate Taxation

· Corporate tax remains @ 30%

· Minimum Alternate Tax increased from 10% to 15%

· Fringe Benefit Tax abolished

· Benefit of 150% deduction of expenditure on scientific research extended to all items of manufacture or production except Eleventh Schedule

· Commodity transaction tax abolished

· STPI benefit extended by one more year. (upto 2010-2011)

· 100% deduction for donations to electoral trusts (political party trusts)

For Firms

· Remuneration of partners of a firm

o Upto Rs.3 lakhs – 150000 or 90% of the book profit whichever is more

o On the balance – at the rate of 60% of the book profit

Limited Liability Partnerships

· Limited Liability Partnership will be treated as Firm in the Income Tax Act.

Special Aspects

· Section 40A (3) dealing with payments in cash in excess of Rs. 20000 amended wrt plying, hiring or leasing goods carriages(transport operators) where the ceiling has been increased to Rs.35000 (1^st Oct 2009)

· Wealth tax limit increased to Rs.30 lakhs

· TDS on rent u/s 194I reduced from 15% to 10% for payment to individuals and at 2% for machinery, plant or equipment

· TDS for contract will be @1% for payment to Individuals/HUF and 2% to any other entity.

· Flat rate of 20% TDS in case deductee doest not furnish PAN to deductor.

· Limit for advance tax raised from Rs.5000 to Rs.10000.

· Presumptive taxation(8%) extended to all business (individuals, HUFs and firms) having turnover less than 40 lakhs

INDIRECT TAX

Customs

· Duty on specified life saving drugs/ vaccine is reduced from 10% to 5% and specified heart devices from 7.5% to 5%.

· Duty on gold bars increased from Rs.100 to Rs.200 per 10 gram, other forms of gold increased form Rs.250 to Rs.500 per 10 grams.

· Duty on silver increased from Rs.500 per Kg to Rs.1000 per Kg

· Duty on cotton, wool waste reduced from 15% to 10%.

Excise

· Duty rates on items currently attracting 45 duty has been increased t 8% with some exceptions like drugs and pharmaceutical items, medical equipments, varieties of paper, paper boards etc

· Duty on manmade fiber and yarn, polyester chips, PTA and DMT, acrylonitrile has been increased from 4% to 8%.

· Scheme of Optional duty for pure cotton is restored

· Full exemption from excise duty is provided for goods manufactured and used in construction sites.

· On packaged software exception is provided on the portion that represents consideration for transfer of right to use.

· Duty on branded articles of jewellery has been reduced from 2% to Nil

· A manufacturer of both dutiable and exempted goods who does not maintain separate accounts of inputs shall pay an equal amount to 5% of the total price of exempted goods instead of 10%

Service Tax

· Service tax imposed for transport of goods by rail, transport of coastal goods and inland water, Legal consultancy services, cosmetic and plastic surgery service.

· Definition of stock broker is amended to exclude sub broker.

· A provider of both dutiable and exempted services who does not maintain separate accounts of inputs shall pay an amount equal to 6% of the total price of exempted services instead of 8%

· Cenvat Credit Rules amended to provide a service provide shall to pay back the amount of credit taken on inputs/capital goods fully written off.

· Retrospective amendment is given to notification no.1/2009 will come into effect from 01.01.2005.