1 UNION BUDGET 2007 S.Bhansali & Associates B R B & Associates KUMBHAT & Co.,

2 HEAD LINES BUDGET – bats for farmers, leaves India Inc. bawling - HINDU BL Inflation hatao, growth badao, Govt. bachao – ET – Mr. Swaminathan A Aiyer noted Economist Corporates, Individual main source of tax revenues – The Hindu PC delivers: Politically Correct – The Indian Express Tax Payers Unhappy; India Inc. says no relief – Financial Express

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6 Income Tax Rs.10000/- increased in slab rate across the board 1% Secondary Education Cess Rs.15000/- for Mediclaim & Rs.20000/- for senior citizen No Surcharge of 10% for firms/cos. declaring taxable income < Rs.1.00 crore

7 Income Tax - contd Dividend Distribution % MAT extended to Non-Tax paying Companies – impact on IT Co’s ESOP’s subject to FBT at the time of exercise of option Free Samples and Display Items removed from FBT E filing to be extended to other types of assessee

8 Income Tax - contd Personal Effects now includes art, painting, drawing, etc Contribution to Pension schemes Interest, Royalty, Tech Services is taxable in India on earning by NRs Compensation recd for disaster Tax Free Bonds by Local Bodies/State Pooled authorities

9 Income Tax (contd.) Definition of Venture Capital expanded Existing co. moving to SEZ not beneficial Computation of Rent Free Accommodation amended w.e.f Group Health Insurance not to be paid in cash 100% disallowance for payment > Rs.20,000 in cash

10 Income Tax (Contd.) 54EC – investment restricted to Rs.50 lacs PAN – the only No. with prefix/suffix Advance FBT dates aligned with Advance IT dates

11 Income Tax (contd.) Capital Gains Tax on ESOPs TDS on 10% vs. 5% TDS on Rent for 10% TDS on Professional 10% vs. 5% TDS threshold for Bank interest increased to Rs.10,000 vs. Rs.5,000

12 Income Tax (Contd.) Penalty on undisclosed income at 10% Settlement procedures amended across all taxes – CD,ED & IT Sec 80IB only for indl. undertaking in J&K set up before

13 SERVICE TAX No rate Change; additional 1% S.E. Cess Limit raised to Rs.8.00 lacs – to intimate at Rs.7.00 lacs More Services brought in – - PMS for Individuals - Rent for commercial purpose - Design Services - Wedding Planners

14 Indirect Taxes – Service Tax Service Tax on Works Contracts introduced – option on composite contract at 2% Exempted – clinical trials, RWA, Science and Technology Entrepreneur parks Late filing penalty Rs.2000 Revised Return within 60 days Excess payment adjustments subject to conditions

15 Customs Duty Peak Rate of customs duty reduced to 10% in most cases Other minor tinkering of Rates Valuation Methodology Changed on imported goods used for export

16 Central Excise Tinkering of Rates Minimum Penalty raised to Rs.10K from Rs.2K E payment, if duties exceed Rs.50l by all Goods manufactured by Job-worker for principal mfr, duty is payable on price charged by principal when sold

17 Pathway for Convergence CST cut to 3% from GST – Target 2010 Rate recommended by Kelkar is 20%

18 Broad Overview Extremely buoyant tax collections GDP growth at 9.20% Higher allocation to agriculture Higher allocation to infrastructure SSI threshold increased to 1.50 cr

19 Market related changes Dividend distribution tax hiked to 15% Div Distribution Tax by MF hiked to 25% TUF Scheme extended Higher allocation to Bharat Nirman from Rs cr to Rs cr Allocation for Rural Infrastructure Fund up from Rs cr to Rs cr

20 Market related changes Deduction u/s 36(1)(viii) restricted to 20% of profits each year BCTT limit raised to Rs.50,000 for individuals Higher allocation to Irrigation development at Rs cr Higher allocation to defence at Rs cr Higher excise duty on cement based on MRP

21 Market related changes Import of coking coal fully exempt from customs duty NHDP outlay increased by approx Rs.1000 cr Customs duty on food processing machinery reduced to 5% from 7.5% All food mixes exempt from excise duty

22 Market related changes Rs.100 cr increased allocation for tourism infrastructure 5 yr tax holiday for star hotels / convention centres in NCR MAT extended to 10A and 10B companies Service Tax on Rent for Commercial Property FBT on ESOPs

23 Market related changes Construction of dedicated rail freight corridor Customs duty on DMT, PTA and MEG reduced from 10 to 7.5% Allocation for Integrated Textile Parks increased to Rs.425 cr from Rs.190 cr

24 Sectoral Impact

25 Sectoral Impact (Contd.)

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