CAduniya.com : CA India Blog

The IT industry on Monday hailed the government’s decision to extend the tax holiday to the software export units by another year, and abolition of FBT, giving much-needed relief to the slowdown-hit sector facing contracted orders and sharp earnings fall.

“In order to tide over the slowdown in exports, I propose to extend the sunset clauses for these tax holidays by one more year– financial year 2010-11,” Finance Minister Pranab Mukherjee said in his Budget speech today. The scheme was due to expire on March 2010.

Nasscom President Som Mittal welcomed the extension and said that though the industry had asked for a five-year break, for short term, the one-year tax holiday is well-timed to tide over the slowdown.

Country’s largest software exporter Tata Consultancy Services and its peers like Infosys, Wipro, Mahindra Satyam, Cognizant and HCL also welcomed the decisions. IT and BPO employees union UNITE also hailed the Budget announcements.

Software exporter TCS CEO S Ramadorai said, for the IT industry the extension of tax exemption under the Software Tecnologies Park of India (STPI) for one more year is a step in the right direction as is the abolitiob of the FBT.

Source / Courtesy: ET

The following new services are proposed to be included in the list of taxable services from a date to be notified

a) Transport of Goods through Rail:

b) Transport of Coastal Goods and Goods transported through Inland water

c) Legal Consultancy Service (other than provided by individual or received by individual)

d) Cosmetic and Plastic Surgery service

a) The services provided by the tour operators undertaking point-to-point transportation of passengers is being fully exempted from service tax, provided such transportation is not in relation to tourism or conducted tours, or charter or hire. (Notification No. 20/209-ST dated 07.07.09 ).

b) The inter-bank transactions of purchase or sale of foreign currency, when undertaken by scheduled banks, is being exempted. (Notification No. 19/2009-ST dated 07.07.09).

c) Federation of Indian Export Promotion Organization (FIEO) and twenty-one specified export promotion councils sponsored by the Department of Commerce or by the Ministry of Textiles are being exempted from the levy of service tax under the said service. This exemption would remain valid till 31.03.2010. (Notification No. 16/2009-ST dated 07.07.09).

Indirect Taxes

Service tax

Service Tax to be imposed on the following services:

• Service provided in relation to transport of goods by rail

• Service provided in relation to transport of coastal cargo; and goods through inland water including National Waterways

• Advice, consultancy or technical assistance provided in the field of law (this tax would not be applicable in case the service provider or service receiver is an individual).

• Cosmetic and plastic surgery service

Exemption from service tax being provided to inter-State or intra-State transportation of passengers in a vehicle bearing ‘Contract Carriage Permit’ with specified onditions.

·         Exemption from service tax (leviable under Banking and other financial services or under Foreign exchange broking service) being provided to inter-bank purchase and sale of foreign currency between scheduled banks.

·         Two taxable services, namely, ‘Transport of goods through road’ and ‘Commission paid to foreign agents’ to be exempted from the levy of service tax, if the exporter is liable to pay service tax on reverse charge basis. However, present cap of 10% on commission agency charges is retained. Thus there would be no need for the exporter to first pay the tax and later claim refund in respect of these services.

·         For other services received by exporters, service tax exemption to be operated through the existing refund mechanism based on self-certification of the documents where such refund is below 0.25 per cent of FOB value, and certification of documents by a Chartered Accountant for value of refund exceeding the above limit.

·         Export Promotion Councils and the Federation of Indian Export Organizations (FIEO) to be exempt from service tax on the membership and other fees collected by them till 31st March 2010.

Direct Taxes

·         No changes made in the Corporate Tax rates.

·         Exemption limit in personal income tax raised by Rs.15,000 from Rs.2.25 lakh to Rs.2.40 lakh for senior citizens; by Rs.10,000 from Rs.1.80 lakh to Rs.1.90 lakh for women tax payers; and by Rs.10,000 from Rs.1.50 lakh to Rs.1.60 lakh for all other categories of individual taxpayers.

·         Deduction under section 80-DD in respect of maintenance, including medical treatment, of a dependent who is a person with severe disability being raised from the present limit of Rs.75,000 to Rs.1 lakh.

·         Surcharge on various direct taxes to be phased out; in the first instance, by eliminating the surcharge of 10 percent on personal income-tax.

·         Sun-set clauses for deduction in respect of export profits under sections 10A and 10B of the Income-tax Act being extended by one more year i.e. for the financial year 2010-11.

·         Fringe Benefit Tax on the value of certain fringe benefits provided by employers to their employees to be abolished.

·         Scope of provisions relating to weighted deduction of 150% on expenditure incurred on in-house R&D to all manufacturing businesses being extended except for a small negative list.

·         Businesses to be incentivised by providing investment linked tax exemptions rather than profit linked exemptions. Investment linked tax incentives to be provided, to begin with, to the businesses of setting up and operating ‘cold chain’, warehousing facilities for storing agricultural produce and the business of laying and operating cross country natural gas or crude or petroleum oil pipeline network for distribution on common carrier principle. Under this method, all capital expenditure, other than expenditure on land, goodwill and financial instruments to be fully allowable as deduction.

·         Minimum Alternate Tax (MAT) to be increased to 15 per cent of book profits from 10 per cent. The period allowed to carry forward the tax credit under MAT to be extended from seven years to ten years.

·         New Pension System (NPS) to continue to be subjected to the Exempt-Exempt-Taxed (EET) method of tax treatment of savings. Income of the NPS Trust to be exempted from income tax and any dividend paid to this Trust from Dividend Distribution Tax. All purchase and sale of equity shares and derivatives by the NPS Trust also to be exempt from the Securities Transaction Tax. Self employed persons to be enabled to participate in the NPS and to avail of the tax benefits available thereto.

·         Alternative dispute resolution mechanism to be created within the Income Tax Department for the resolution of transfer pricing disputes. Central Board of Direct Taxes (CBDT) to be empowered to formulate ‘safe harbour’ rules to reduce the impact of judgemental errors in determining transfer price in international transactions.

·         Commodity Transaction Tax (CTT) to be abolished.

·         Donations to electoral trusts to be allowed as a 100 percent deduction in the computation of the income of the donor.

·         Deduction under section 80E of the Income-tax Act allowed in respect of interest on loans taken for pursuing higher education in specified fields of study to be extended to cover all fields of study, including vocational studies, pursued after completion of schooling.

·         To mitigate the practical difficulties faced by charitable organisations, anonymous donations received by charitable organisations to the extent of 5 percent of their total income or a sum of Rs.1 lakh, whichever is higher, not to be taxed.

·         Scope of presumptive taxation to be extended to all small businesses with a turnover upto Rs. 40 lakh. All such taxpayers to have option to declare their income from business at the rate of 8 percent of their turnover and simultaneously enjoy exemption from the compliance burden of maintaining books of accounts. As a procedural simplification, they are also to be exempted from advance tax and allowed to pay their entire tax liability from business at the time of filing their return. This new scheme to come into effect from the financial year 2010-11.

·         Tax holiday under section 80-IB(9) of the Income Tax Act, which was hitherto available in respect of profits arising from the commercial production or refining of mineral oil, to be extended to natural gas. This tax benefit to be available to undertakings in respect of profits derived from the commercial production of mineral oil and natural gas from oil and gas blocks which are awarded under the NELP-VIII round of bidding. The section to be retrospectively amended to provide that “undertaking” for the purposes of section 80-IB(9) will mean all blocks awarded in any single contract.

Finance Minister Pranab Mukherjee has announced that Fringe Benefit Tax (FBT) has been abolished.
The commodity transaction tax (CTT) has also been abolished. The Goods and Services Tax (GST) will come into effect from April 01, 2010, Mukherjee said.

Finance minister Pranab Mukherjee proposed to raise by Rs 10,000 the exemption limit for women on Income Tax.

For all others, the limit was increased by Rs 10,000 from Rs 1,50,000 to Rs 1,60,000.

Mukherjee presented the Union Budget for 2009-2010 at the Lok sabha on Monday.

Union Budget 2009-2010

Some headings:

Small businesses up to Rs 40 lakh (Rs 4 million0 turnover exempted from filing advance tax returns.

10 per cent surcharge on personal income tax removed.

Personal income tax exemption limit raised by Rs 10,000.

Tax proposals! Income Tax rates exemption limit to raised from Rs 180,000 to 190,000 for women.

Tax proposals! Income Tax rates exemption limit to 2.25,000 to 2,40,000 for senior citizens.

Institute (ICAI) has completed 60 year and entered into 61st year today. (1949 - 2009).

http://www.icai.org