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M.V.Damania & Co. Chartered Accountants
Budget Highlights – 2009
1. Effective Rate of Direct Tax:
Personal Taxation:
• • • Marginal increase in basic exemption limit. Education and Higher education cess kept intact. Surcharge Removed.
The revised limits are as follows: For Individuals, HUF, AOP and Artificial Jurisdiction Person:
For Financial Year 2008 – 09 Up to Rs. 150,000/150,001 – 300,000 Nil 10% of Income exceeding 150,000/15,000 plus 20% of Income exceeding 300,000/-
For Financial Year 2009 – 10 Up to 160,000 160,001 – 300,000 Nil 10% of Income exceeding 160,000/14,000 plus 20% of Income exceeding 300,000/54,000 plus 30% of Income exceeding 500,000/No Surcharge
300,001 – 500,000
300,001 – 500,000
500,000 – 10,00,000
55,000 plus 30% of Income exceeding 500,000/-
500,001 – 10,00,000
Above 10,00,000
Surcharge @ 10%
Above 10,00,000
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Education cess of 3% has to be included on the above tax amount. The basic exemption limit for woman assessee has been increased from Rs. 180,000/- to Rs. 190,000/The basic exemption limit for senior citizens have been increased from Rs. 225,000/- to Rs. 240,000/-
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Partnership Firms:
• No change in the Effective Rate of Tax for partnership firms except that the surcharge has been removed on Income exceeding Rs, 1 Crore. Thus the effective tax slabs are as follows: FY 2008-09 For Income up to Rs. 1 Crore For Income above Rs. 1 Crore 30.90% 33.99% FY 2009-10 30.90% 30.90%
Corporate Tax:
Domestic Companies: • • • • No change in effective Rate of Tax ie. 30.90% for Income Up to Rs. 1 Crore and 33.99% for Income exceeding Rs. 1 Crore. No change in Dividend Distribution Tax (DDT) of 16.995%. The effective Rate of Minimum Alternative Tax (MAT) has been increased from 11.33% to 16.995%. The carry forward and set-off of MAT credit to be allowed is increased from 7 years to 10 years.
Foreign Companies: • No change in effective Rate of Tax of 41.2% in case of Income Up to Rs. 1 Crore and 42.23% in case of Income exceeding Rs. 1 Crore.
2. Personal Taxation:
• Deduction under section 80DD in respect of maintenance including medical treatment of a Dependent who is a person with disability has been increased from Rs. 75,000/- to Rs. 100,000/-. Deduction under section 80E in respect of interest on Loan taken for higher education in specified fields. The definition of specified fields has been expanded to now cover all fields of studies including vocational studiese pursued after completing schooling education. Presently, Section 56 provides that “any sum of money” exceeding Rs. 50,000/received by an Individual or HUF (except from Relatives as defined under the Act) without any consideration (i.e. Gift) will be treated as Income in the hands of recipient. It was interpreted that “any sum of money” means only funds and anything received in Kind was not taxable. Now W.E.F. 1st October 2009, even any receipt in Kind will be included in the definition of “any sum of money”.
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3. Business Enterprises:
Fringe Benefit Tax (FBT) has been abolished W.E.F. 1st April 2009. The assessee will be eligible to get refund of any FBT paid for the FY 2009-10. • A new Presumptive Taxation scheme has been introduced for any business having Turnover/Gross Receipts up to Rs. 40 Lakhs. The salient features of the scheme are: o The scheme is applicable to Individuals, H.U.F., and Partnership Firms excluding Limited Liability Partnerships (LLPs). o The Profit from the business shall be deemed to be 8% of the Total Turnover/Gross Receipts. o The scheme will be effective from 1st April 2011. o The assessee shall be exempt from payment of Advance Tax. o No books of Accounts are required to be maintained. o If the assessee shows income below the presumptive limit prescribed as above, books of accounts will have to be maintained and also get them Audited. • The concept of Limited Liability Partnership (LLP) has been accorded. The LLP will be taxed as a Partnership firm. Conversion of Firm into LLP would have no tax implication if the rights and obligations of Partners remain same after conversion and there is no transfer of Asset or Liability after conversion. • The limit of Remuneration to working partners have been revised and made it uniform for Business and Professional Firms. The changes are: •
Up to F.Y. 2008-09
Business Firm (Book Profit) On First Rs. 75,000/- or in case of Loss On next Rs. 75,000/On balance Amount Professional Firm (Book Profit) On First Rs. 100,000/- or in case of Loss On next Rs. 100,000/On balance Amount Remuneration as % of Book Profit Higher of 90% of Book Profit or Rs. 50,000/60% of Book Profit 40% of Book Profit
From F.Y. 2009-10
Any Firm (Book Profit) On First Rs. 300,000/- or in case of Loss On balance amount Remuneration as % of Book Profit Higher of 90% of Book Profit or Rs. 150,000/60% of Book Profit
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The TDS Rates have been rationalized and reduced. It has been clarified that while deducting Tax at Source on non-salary payments made to resident tax payers, the rates have not to be increased by Education Cess.
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For Private Circulation only • The TDS Rates have changed under the following heads:
M.V.Damania & Co. Chartered Accountants
Nature of Payment Rent for Land, Building, furniture & fittings to an Individual or H.U.F. Rent for Land, Building, furniture & fittings to a person other then Individual or H.U.F. Rent of Plant, Machinery or Equipments Individual/HUF Contractor/Subcontractor/Advertisement contract Person other than Individual/HUF Contractor/Sub-contractor/Advertisement contract Contractor/Sub-contractor in Transport business •
Existing Rate 15% 20% 10% 1% or 2% as the case may be 1% or 2% as the case may be 1% or 2% as the case may be
Revised Rate 10% 10% 2% 1% 2%
Nil
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Every person whose receipts are subject to Tax Deduction at Source is required to furnish PAN to the deductor of TDS failing which the deductor shall deduct tax at higher of the Rate prescribed as per the Act or 20%. Furnishing of Quarterly Statement of TDS has been done away with. Effective from 1st October 2009, only Annual Statement of TDS will have to be furnished. Alternate Dispute Resolution Board consisting of Three Commissioners shall be formed for foreign Companies and Transfer Pricing cases. The Assessing Officer shall circulate the draft Assessment Order to the Assessee and ADR Board. The Assessee Company may file their counter objection to the draft Assessment Order with the ADR Board. The ADR Board will based on the draft order, objection received and discussion, guide the Assessing Officer as to the manner in which the Assessment Order should be completed.
4. Other Incentives/Benefits:
• • • • Advance Tax would be payable only if the Tax liability exceeds Rs. 10,000/-. Wealth Tax exemption limit enhanced from Rs. 15 Lakhs to Rs. 30 Lakhs. Commodities Transaction Tax (CTT) abolished. Anonymous Donations received by wholly Charitable Organisations to the extent of 5% of their total Income or Rs. 100,000/-, whichever is higher, shall now not be taxed. Perpetual approval for recognition of Institutes eligible under section 80G(5) has been granted. The commissioner of Income Tax has been given power to withdraw the recognition under certain circumstances effective from 1st October 2009.
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M.V.Damania & Co. Chartered Accountants
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Tax Holiday presently enjoyed by Software Technology Park (STP) units and Free Trade Zone (FTZ) units under section 10B/10A have been extended by one more year up to 31st March 2011. In case of units in SEZ, the method of Computation has been amended. The deduction shall be computed with reference to the Total Turnover of the Undertaking instead of Turnover of The Assessee. This amendment will take effect from 1st April 2010. The terminal date for tax deduction available to an undertaking set up for reconstruction or revival of Power generator plant or commencing the activity of generation, transmission or distribution of power has been extended to 31st March 2011. The weighted deduction @ 150% available on the expenditure incurred on in house scientific Research and Development facility has been extended to Companies engaged in business of manufacturing or Production of articles or things except certain non- priority items specified under Eleventh Schedule. A new Investment linked Tax saving scheme provided to the business of setting up and operating Cold Chain, Warehousing facilities for storing agriculture produce and business of laying and operating cross country natural gas or crude or petroleum oil pipeline network for distribution on common carrier principle. Under this scheme, all the Capital Investments other than investment in Land, Goodwill or Financial instruments to be fully allowed as deduction.
5. Other Amendments:
• • Any claim of deduction will be allowed only if the deduction is claimed in the Return of Income. It has been clarified that in the case of Reassessment under section 147, the Assessing Officer has power to reassess any other issues apart from the issues recorded for the purpose of reassessment proceedings. CBDT is empowered to formulate “Safe Harbour” Rule that will provide circumstances in which the Income Tax Authorities shall accept the Transfer Price declared by the Assessee. With a view to put to rest the dispute arising in conflicting interpretation of provisions of Section 92C(2) of The Income Tax Act, amendment have been made in determination of Arms’ Length Price. It has been provided that where more than one price is determined by the most appropriate method; the Arms’ Length Price shall be taken to be the arithmetic mean of such prices. It is further provided that if the variation between the Arms’ Length Price so determined and the International Transaction price does not exceed 5% of the International price, the price at which the International transaction has been actually undertaken shall be deemed to be the Arms’ Length Price.
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