ANALYSIS OF UNION BUDGET 2005

Upto Rs 50,000Nil Rs 50k – Rs 60k10% Rs 60k - Rs 150k20% Above Rs 150k 30% PERSONAL TAX – THE SLABS Existing structure Now Proposed Upto Rs 100,000 Nil Rs 100k – Rs 150k 10% Rs 150k - Rs 250k 20% > Rs 250k 30% For Women 125 K. Senior Citizen 150 K

Sec 80 C: Savings Allowance Deduction from Gross Total Income. Restricted to Rs.100,000 (including Sec.80 CCC & 80 CCD) Sectoral Cap u/s Sec.88 withdrawn Withdrawal of Standard Deduction, Rebates & deduction u/s.80L Sec.80E substituted for deduction only for interest on educational loan SAVINGS AND INVESTMENTS

Tax rate for domestic companies: 30% Surcharge: 10% MAT credit introduced Depreciation on General Plant: 15% Initial Depreciation: 20% 10% increase in installed capacity withdrawn Deduction as regards payment under VRS Discount on zero coupon bonds – deductible TDS for technical services: 10%

Wt deduction of 150% on in house R & D Industrial Undertaking in J & K 100% deduction of profits of companies carrying on Scientific R & D and approved by DSIR TERMINAL DATES EXTENDED to 31 st March 2007

TRANSACTIONS RELATING TO SECURITIES Nominal increase in STT Trading in derivatives in specified stock exchanges will not be treated as speculative transaction

FRINGE BENEFIT TAX (FBT) Employer to pay tax on Fringe Benefits Rate of Tax 30% Payable even if there is no IT liability Exemptions: Perks taxable for employee Travel expenses to and fro place of work FBT not allowed as deduction

Constitutional validity Applicability to charitable trust Knowledge of business and changing requirements Use of Health club facilities 50% Club facilities 50% Telephone 10% R & M of Motor Cars and Aircrafts 20% FRINGE BENEFIT TAX (FBT)

PROCEDURAL ASPECTS OF (FBT) Payment of tax & interest Filing of return Assessment / reassessment Rectification Revision Appeal Penalty

BANKING CASH TAX Why What Cash > Rs.10 K on a single day DD > Rs.10 K on a single day Cash receipt > Rs.10 K on a single day on encashment of term deposit How 0.1% of transaction Who Bank to collect and pay the tax

FM ASKS: “ Why are you guys so worried about cash withdrawals? I am becoming increasingly interested in that.” BANKING CASH TAX

Constitutional validity? Practical examples Withdrawal for Purchase of property Medical expenses on an emergency Meeting deadlines to comply with tender requirements BANKING CASH TAX

Administrative Difficulties Increase in bank transactions Increase in work load of banks Procedural compliance to collect and pay tax BANKING CASH TAX

Indian Inc – Most Favoured Nation why? Inflation under control Comfortable Foreign exchange reserves Proportion of Direct & Indirect Taxes Emphasis given for manufacturing agriculture and infrastructure Thrust for Foreign Direct Investment

Reduction in tax rates Savings in tax - flexibility in investments Introduction of VAT Stock Market Reactions India a favoured destination Indian Inc – Most Favoured Nation why?

Required Action Steps to be taken to widen tax base Changes required in FBT and BCTT Action taken report