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INDIA BUDGET 2008 SYNOPSIS Rates 2007 – 08 and 2008 – 09
INR
10% Till 10,000
In his Budget Statement on 29 February 2008, the Minister for Finance 20% 10,001 – 20,000
announced a number of changes to the tax system. 30% Over 20,001
(A) INCOME TAX Education cess will be levied @ 3%.
I. Individual: III. Partnership Firm
The tax rates remain unchanged at 10%, 20% and 30%. However, the No changes are proposed for the tax rates applicable to partnership firm.
thresholds exemption limits have been enhanced and the tax slabs have been Partnership firm would continue to be taxed at a flat rate of 30% on the whole of
changed. The table below sets out the tax rates and bands. the income. Surcharge will be levied @ 10%, if the total income of the firm
exceeds INR 10 million. Education cess will be levied @ 3%. The effective tax
Resident Woman below 65 years: rates thus could work out to 30.90% or 33.99% as the case may be.
Rates 2007 – 08 2008 - 09 IV. Companies / Corporates
INR INR
Corporate Tax
NIL Till 145,000 Till 180,000
10% 145,001 – 150,000 180,001 – 300,000
There are no changes made in the corporate income tax rates. The rates
20% 150,001 – 250,000 300,001 – 500,000
applicable would be
30% 250,001 & above 500,001 & above
Rates (inclusive of surcharge and cess)
Resident Senior Citizen:
If Total income If Total income is
Company
exceeds INR 10 less than INR 10
Rates 2007 – 08 2008 – 09 Million Million
INR INR
Domestic Company 33.99% 30.90%
NIL Till 195,000 Till 225,000
Foreign Company 42.23% 41.20%
10% -- 225,001 – 300,000
20% 195,001 – 250,000 300,001 – 500,000
Dividend Distribution Tax (DDT)
30% 250,001 & above 500,001 & above
There are no changes in the rates of DDT. Dividends that are declared /
Other Individuals: distributed attract a tax of 15%. Surcharge and Education cess will be levied @
10% and 3% respectively. So, the effective DDT rate would be 16.995%.
Rates 2007 – 08 2008 - 09
INR INR Minimum Alternate Tax (MAT)
NIL Till 110,000 Till 150,000
10% 110,001 – 150,000 150,001 – 300,000 MAT is levied @ 10 percent of the adjusted book profits in the case of companies
20% 150,001 – 250,000 300,001 – 500,000 where income-tax payable on the taxable income according to the normal
30% 250,001 & above 500,001 & above provisions of the Income-tax Act, 1961, is less than 10 percent of the adjusted
book profits.
In addition to above, Surcharge will be levied @ 10% if the total income of the
tax payer exceeds INR 1 million. Education cess will be levied @ 3% on the total Surcharge is applicable @ 10 percent in the case of domestic companies (2.5%
amount including surcharge, if any. in case of foreign company) if the adjusted book profits are in excess of INR 10
Million. Education cess is applicable @ 3 percent on income-tax (inclusive of
II. Co - operative Society: surcharge, if any).
No changes have been announced in the budget. The tax rates applicable are:
V. Securities Transaction Tax (STT) VII. Fringe Benefit Tax
There are no changes in STT Rates. STT is levied on purchase and sale of shares Tax on specified fringe benefits provided to employees @ 30 % plus applicable
and securities through Stock Exchanges. STT is levied on the value of taxable surcharge and education cess thereon.
securities transactions as under:
(B) CAPITAL GAINS TAX
Transaction Rates Payable by
There are no changes in the capital gains tax rates except tax rates on short
Purchase/Sale of equity shares, units of 0.125% Purchaser/ Seller term capital gains have been increased from 10% to 15%. The Capital Gains tax
equity oriented mutual fund rates are as follows:
(delivery based)
Particulars Short Term Capital Long Term Capital
(a) (a)
Sale of equity shares, units of equity 0.025% Seller Gains Tax Rate Gains Tax Rate
oriented mutual fund (non –delivery Sale transactions of equity 15% Nil
based) shares / unit of an equity
oriented fund which attract STT
(a) 0.017% Seller
Sale of derivatives Sale transaction other than
mentioned above:
(b) 0.017% Seller Individuals (resident and non- Progressive Slab 20% with indexation
Sale of an option in securities
residents) rates as mentioned or 10% without
Sale of an option in securities, where 0.125% Purchaser above indexation (for listed
(b) Partnerships (resident and non- 30% securities traded
option is exercised
residents) other than stock
(b)
exchange, units &
Sale of a futures in securities 0.017% Seller zero coupon bonds)
Resident Companies 30%
Sale of unit of an equity oriented fund to 0.25% Seller Overseas financial organisations 40% (corporate) 10%
the Mutual Fund specified in section 115AB 30% (non-corporate)
(a) Applicable upto 31 May 2008. FIIs (u/s 115AD) 30% 10%
(b) Applicable w.e.f. June 2008.
Other Foreign Companies 40% 20% with indexation
VI. Commodities Transaction Tax (CTT) or 10% without
Local Authority 30% indexation (for listed
CTT is introduced in the Budget 2008 on the lines of STT. It is applicable on securities traded
commodities traded on the commodities exchanges and is levied on the value of Co-operative Society Progressive Slab other than stock
taxable commodities transaction as under: rates as mentioned exchange, units &
above zero coupon bonds)
Transaction Rates Payable by
(a) to be increased by surcharge and education cess, as applicable.
Sale of an option in goods or an 0.017% Seller
option in commodity derivative Short term capital assets are assets held for a period of less than 3 years (1
year in case of shares and securities).
Sale of an option in goods or an 0.125% Purchaser
option in commodity derivative, (C) WEALTH TAX
where option is exercised
There are no changes in the Wealth Tax rates. Wealth tax is imposed @ 1
Sale of any other commodity 0.017% Seller percent on the value of specified assets held by the taxpayer in excess of the
derivative basic exemption of INR 1.5 Million.
Others Changes: Withholding Tax rates in respect of payments to non-residents:
Due Date for Filing of Return of Income There are no changes in the withholding tax rates. The following incomes in the
It is proposed that the corporate entities whose accounts are audited under any case of non-resident are taxed at special rates on gross basis:
law should file their return of income by 30 September instead of 31 October.
(a)(c)
Nature of Income Rate
Five Year Tax Holiday for set up of hospitals (b)
Dividend 20%
A five year 100% tax holiday is proposed for the hospitals set up in tier- 2 and
tier-3 towns for providing healthcare in rural areas subject to certain conditions. Interest received on loans given in
foreign currency to Indian concern or 20%
Five Year Tax Holiday for set up of hotels Government of India
A five year 100% tax holiday is proposed for two, three or four star hotels Income received in respect of units
20%
established in specified districts having UNESCO-declared 'World Heritage Sites’ purchased in foreign currency
subject to certain conditions. For Agreements entered into:
- After 31 May 1997 but before 1 June
Royalty of fees for technical services
Set off of Dividend by the Parent Company 2005 - @ 20%
Parent company would be allowed to set off the dividend received from its - On or after 1 June 2005 - @ 10%
subsidiary company against dividend distributed by the parent company; Interest on FCCB, FCEB /
(b) 10%
provided that the dividend received has suffered Dividend Distribution Tax Dividend on GDRs
(‘DDT’) and the parent company is not a subsidiary of another company. (a) These rates will further increase by surcharge and education cess
(b) Other than dividends on which DDT has been paid
Expenditure on Scientific Research (c) In case the non-resident has a Permanent Establishment (PE) in India and
A weighted deduction of 125% on any payment made to companies engaged in the royalty / fees for technical services paid is effectively connected with such,
research and development is proposed. the same could be taxed at 40% (plus surcharge and education cess) on net
basis
Amortization of Preliminary Expenses Tax on non-resident sportsmen or sports association on specified income @ 10%
Benefit of amortization of certain preliminary expenses is proposed to be plus applicable surcharge and education cess.
extended to all sectors, hitherto not covered.
(D) INDIRECT TAXES
Other Miscellaneous Amendments:
Conversion of Foreign Currency Exchangeable Bonds (‘FCEB’) into shares / Central Sales Tax (CST)
debentures shall not be a taxable transfer.
The rate of CST is proposed to be reduced from 3% to 2% effective from 1 April
Interest on corporate debt instruments issued in Demat form and listed on 2008. Goods and Services Tax (‘GST’) is proposed to be introduced effective 1
recognised stock exchanges would be exempted from Tax Deduction at Source April 2010.
(TDS).
Excise Duties
It is proposed that STT paid would be treated like any other deductible
expenditure against business income rather then set-off (rebate) against taxes The peak rate of Excise duty is reduced from 16% to 14%.
payable. Excise Duty is reduced for goods produced in Pharma sector to 8%, Small Cars,
Buses and Chassis and two wheelers to 12%, Hybrid cars reduced to 14% and
Income Tax Act proposed to be amended to provide that reverse mortgage certain other products, whereas it is increased to 12% on packaged software.
would not amount to "transfer"; and the amount of loan received by the senior
citizen would not be "income". Customs Duties
Crèche facilities, sponsorship of an employee-sportsperson, organising sports Peak rate of Customs Duty remain unchanged at 10%.
events for employees and guest houses is proposed to be excluded from the
purview of FBT. Service Tax
Rate of Service Tax remains unchanged @ 12% and threshold limit for
exemption increased to Rs. 1 million.
Contact:
Manish Shah
Partner- Direct Taxation
SKP Group
Ballard House, 2nd Floor, Adi Marzban Path,
Ballard Estate,
Mumbai - 400 001, India
Tel: + 91 22 6617 8000
Fax: +91 22 6617 8002
Email:manish.shah@skparekh.com
Other offices located at Bangalore, Delhi, Hyderabad and Pune.
This document has been prepared as a service to our clients. It summarizes the salient features of the Union Budget 2008. We recommend you seek professional advice before taking action on
specific issues. Further, information and assistance may be obtained from any of our offices listed on our website – www.skpgroup.com
