the union budget 2009-10 sushil budhia associates chartered accountants 106/107 shrikant chambers...

THE UNION BUDGET 2009-10

SUSHIL BUDHIA ASSOCIATES Chartered Accountants

106/107 SHRIKANT CHAMBERS NEXT TO RK STUDIO, V.N PURAV MARG,

CHEMBUR, MUMBAI 400071. Phone: 91-22) 25206534 Fax: (91-22) 25208079

Website: www.sbaindia.co.in

AN OVERVIEW

Sushil Budhia Associates Chartered Accountants

AN OVERVIEW OF UNION BUDGET 2009-10

KEY FOCUS OF THE BUDGET

INFRASTRUCTURE DEVELOPMENT

AGRICULTURAL DEVELOPMENT

RESTORING EXPORT GROWTH

CONTROL FISCAL DEFICIT THROUGH INSTITUTIONAL REFORMS

RESTORE GDP GROWTH @ 9%

RATIONALISATION OF TAX .


• Proposals relating to Direct Tax Rates of Tax

Marginal increase in the Basic Exemption Limit.

Tax slab rates in case of individuals, HUFs, Association of Persons or Body of Individuals as Under :

Income Slab Rate of TaxUpto Rs. 160,0001 Nil

Rs. 160,001 to Rs. 300,000 10%

Rs. 300,001 to Rs. 500,000 20%

Above Rs. 500,000 30%

• No surcharge to be levied while computing total income.

• 2% Education cess and 1% secondary and higher education cess aggregating to 3% payable on income-tax to continue.

1 This will be Rs. 190,000 for a resident woman assessee below the age of 65 years and Rs. 240,000 for a resident individual who is of the age of 65 years or more Sushil Budhia Associates

Chartered Accountants

• Tax rates for companies:Domestic Companies

Foreign Companies

Rate of tax 30% 40%Surcharge thereon where taxable income exceeds Rs. 10,000,000

10% 2.5%

Education cess payable on income tax and surcharge

2% 2%

Secondary and Higher Education cess on income tax and surcharge

1% 1%

Effective tax rate 33.99% 42.23%

• Tax rates for firms (including LLP):

Rate of Tax

Rate of tax 30%

Education cess payable on income tax 2%

Secondary and Higher Education cess on income tax

1%

Effective tax rate 30.90%

No surcharge to be levied while computing the total income of firms. Sushil Budhia Associates

Chartered Accountants

• Minimum Alternate Tax (MAT):

Type of Company

Domestic Companies Foreign Companies

Rate of tax 15% 15%

Surcharge 10% 2.5%

Education cess 3% 3%

Effective rate 16.995% 15.836%

MAT credit as per 115JAA to be allowed to be carried forward for 10 assessment years (previously 7 years), immediately succeeding assessment year in which tax credit becomes allowable.


Website: www.sbaindia.co.in

• Tax on distributed Profits of Indian companies:

Rate of tax 15%

Surcharge thereon 10%

Education Cess and Secondary and Higher Education Cess payable on income tax and surcharge

3%

Effective tax rate 16.995%

• Tax on distributed income to unit holders of mutual funds :

Category ofMutualfunds

Money MarketMutual funds

orliquid funds

Other Funds

Income distributedto an individual orHUF

Income distributedto any person otherthan individual or

HUF

Rate of tax 25% 12.5% 20%

Surcharge 10% 10% 10%

Education Cess 3% 3% 3%

Effective rate 28.325% 14.1625% 22.66%


• DIRECT TAX PROPOSALSINDIVIDUALS & HUF

•BASIC EXEMPTION LIMIT FOR INDIVIDUALS & HUF INCREASED AS FOLLOWS:

CATEOGORY OF ASSESSEE EXISTING EXEMPTION LIMIT PROPOSED EXEMPTION LIMIT

SENIOR CITIZENS 225000 240000

WOMEN 180000 190000

OTHERS 150000 160000

• NO CHANGE IN TAX RATES

• SURCHARGE REMOVED, BUT EDUCATION CESS CONTINUES.


• INCREASE IN DEDUCTION U/S 80DD FROM RS.75000 TO RS.100000 FOR MEDICAL TREATMENT OF SEVERE DISABILITY OF DEPENDANT . • DEDUCTION U/S 80E IN RESPECT OF INTEREST ON EDUCATION LOAN NOW ALLOWABLE FOR PURSUING ANY COURSE AFTER SENIOR SECONDARY EDUCATION.

• ESOPS, CONTRIBUTION TO SUPERANNUATION IN EXCESS OF RS.100000 AND OTHER FRINGE BENEFITS AND AMMENITIES (AS MAY BE PRESCRIBED) LIABLE TO TAX AS PERQUISITES IN THE HANDS OF EMPLOYEES.


PARTNERSHIP FIRMS:• NO CHANGE IN TAX RATES • NO SURCHARGE . (EDUCATION CESS CONTINUES)• NO FBT• UPWARD REVISION OF ALLOWABLE LIMITS OF SALARY TO PARTNERS

EXISTING PROPOSEDTYPE OF FIRM PROFIT ALLOWABLE

SALARY TO PARTNER

PROFIT ALLOWABLE SALARY TO PARTNER

A)PROFESSIONALUPTO FIRST 1,00,000 OR LOSS

90% OF PROFIT OR RS.50000 IN CASE OF LOSS

UPTO 300000 OR LOSS 90% OF PROFIT OR RS.150000T

NEXT 100000 60% BALANCE PROFIT 60% OF PROFITBALANCE PROFIT 40%

B )OTHER THAN PROFESSIONAL

UPTO FIRST 75 000 OR LOSS

90% OF PROFIT OR RS.50000 IN CASE OF LOSS

UPTO 300000 OR LOSS 90% OF PROFIT OR RS.150000T

NEXT 75000-150000

60% BALANCE PROFIT 60% OF PROFIT

BALANCE PROFIT 40%


CHARITABLE TRUSTS.• ANONYMOUS DONATION :

NOT LIABLE TO TAX IN CASE OF WHOLLY RELIGIOUS TRUSTS IN CASE PARTLY RELIGIOUS AND PARTLY CHARITABLE TRUST : ANONYMOUS DONATIONS RECEIVED TOWARDS MEDICAL OR EDUCATIONAL INSTITUTION EXEMPT TO THE EXTENT OF 5% OF INCOME OR RS.100000/- WHICHEVER IS HIGHER

IN CASE OF ALL OTHER CHARITABLE TRUST : ANONYMOUS DONATIONS RECEIVED EXEMPT TO THE EXTENT OF 5% OF INCOME OR RS.1,00,000 WHICHEVER IS HIGHER

• TIME LIMIT FOR FILING APPLICATION FOR EXEMPTION U/S 10 (23C) EXTENDED TO 30TH SEPTEMEBER OF THE SUCCEEDING FINANCIAL YEAR.

• APPROVAL ONCE GRANTED TO TRUST U/S 80G TO CONTINUE PERPETUALLY UNLESS WITHDRAWN BY TAX AUTHORITIES.


CORPORATES

• INCREASE IN THE MINIMUM ALTERNATE TAX FROM 10% TO 15%. CARRY FORWARD OF MAT CREDIT EXTENDED TO 10 CONSECUTIVE YEARS WITH EFFECT FROM 1.4.2006

• NO CHANGE IN RATES OF TAX.

• TAX HOLIDAY U/S 10A/10B FOR STPI/EOU EXTENDED UPTO 31.3.2011.

• FBT ABOLISHED


OTHER DIRECT TAX AMMENDMENTS RELATED TO “BUSINESS INCOME”

• WEIGHTED DEDUCTION OF 150% FOR R&D EXPENSES U/S 35D EXTENDED TO ALL MANUFACTURING BUSINESSES.

• 100% DEDUCTION U/S 35AD FOR CAPITAL EXPENDITURE FOR SPECIFIED BUSINESS .

• DEDUCTION U/S 80IB (10) FOR HOUSING PROJECTS NOT ALLOWABLE IF: 1) CONSTRUCTION IS ON WORKS CONTRACT BASIS 2) IF MORE THAN ONE UNIT IS ALLOTTED TO AN INDIVIDUAL OR HIS RELATIVE.

• TERMINAL DATE FOR COMMENCING POWER GENERATION /DISTRIBUTION FOR ELIGIBILITY OF TAX HOLIDAY U/S 80 IA (4) (iv) EXTENDED TILL 31.3.2011.


• INDIVIDUALS,PARTNERSHIP FIRMs & HUFs CARRYING ON BUSINESS & HAVING GROSS RECEIPTS/SALES BELOW RS.40 LAKHS ELIGIBLE TO OPT FOR PRESUMPTIVE INCOME @ 8% OF GROSS SALES/RECEIPTS WITHOUT MAINTAINING BOOKS OF ACCOUNTS. (EFFECTIVE -A.Y.2011-12)

• PRESUMPTIVE INCOME U/S 44AE FOR TRUCK OWNERS NOT OWNING MORE THAN 10 TRUCKS ENHANCED TO RS.5000/P.M./PER VEHICLE FOR HEAVY GOODS VEHICLE & RS. 4500/P.M./PER VEHICLE FOR OTHER GOODS VEHICLE. (EFFCETIVE –A.Y.2011-12) • ASSESSEE’S PAYING TAX UNDER PRESUMPTIVE INCOME U/S 44AD NOT LIABLE TO ADVANCE TAX.

• LIMIT OF CASH PAYMENT TO TRANSPORTERS INCREASED TO RS.35,000 FROM EXISTING LIMIT OF RS.20,000


INCOME FROM OTHER SOURCES

• TRANSACTION WITHOUT CONSIDERATION OR FOR INADEQUATE

CONSIDERATION LIABLE TO TAX U/S 56 W.E.F. 1.10.2009.

• IMMOVABLE PROPERTY PURCHASED FOR CONSIDERATION BELOW

STAMP DUTY VALUATION LIABLE IN THE HANDS OF THE PURCHASER

IF THE DIFFERENCE IN VALAUATION EXCEEDS RS.50,000 W.E.F

1.10.2009


OTHER AMMENDMENTS

• 100% DEDUCTION FOR DONATIONS MADE TO ELECTORAL TRUSTS.

• ADVANCE TAX PAYABLE ONLY IN CASE TAX PAYABLE EXCEEDS RS.10,000

• WEALTH TAX EXEMPTION LIMIT INCREASED TO RS.30,00,000 FROM EXISTING LIMIT OF RS.15,00,000

• COMMODITY TRANSACTION TAX ABOLISHED.


TDS PROVISIONS TDS ON ALL NON-SALARY PAYMENTS NOT LIABLE TO SURCHARGE & EDUCATION CESS

PAYMENT TO TRANSPORTERS NOT LIABLE TO TDS U/S 194C W.E.F. 1.10.2009 . TDS WILL BE DEDUCTIBLE AS FOLLOWS: IN CASE P.A.N. IS NOT FURNISHED BY DEDUCTEE TILL 31.3.2010 TDS @ 1% IN CASE OF INDIVIDUAL/HUF AND 2% IN CASE OF OTHERS W.E.F 1.4.2010 - TDS WILL BE 20%

TDS ON PAYMENT TO CONTRACTORS/SUBCONTRACORS INCLUDING PAYMENT FOR ADVERTISING U/S 194C LIABLE @ 1% IN CASE OF INDIVIDUA/HUF AND 2% FOR OTHERS.

DEDUCTEES NOT FURNISHSING PAN LIABLE TO TDS @ 20% W.E.F.1.4.2010.

TDS ON RENT : (w.e.f 01.10.2009)• REDUCED TO 2% IN CASE OF RENTING OF MACHINERY AND FURNITURE.• REDUCED TO 10% FOR RENTING OF IMMOVABLE

PROPERTY.


• RATIONALISATION OF TAX PROVISIONS

•TRANSFER PRICING:

• CBDT TO FRAME SAFE HARBOR RULES.

• TRANFER PRICE TO BE TREATED AT “ ARMS LENGTH PRICE” IF WITHIN 5% PLUS OR MINUS OF ARITHMATICAL MEAN OF PRICE DETERMINED BY MOST APPROPRIATE METHOD.

• SETTING UP OF ALTERNATE DISPUTE RESOLUTION MECHANISM.

•TAX ASSESSMENTS:

• TDS RETURNS TO BE ASSESSED WITHIN TWO YEARS FROM THE END OF THE FINANCIAL YEAR IN WHICH RETUNS HAVE BEEN FILED.

• ASSESSING OFFICER MAY ASSESS /REASSESS ANY ISSUE IF THE ASSESSMENT IS REOPENED.


AMMENDMENTS TO SERVICE TAX


• AMMENDMENTS TO SERVICE TAX

• NO CHANGE IN THE RATES

• NEW SERVICES ADDED (EFFECTIVE ON PASSING OF THE BILL)

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 EITHER THE SERVICE PROVIDER OR SERVICE RECEIVER IS AN INDIVIDUAL).

COSMETIC AND PLASTIC SURGERY SERVICE OTHER THAN MEDICAL REASONS.


• CHANGE IN SCOPE OF SERVICES

MANUFACTURING NOT RESULTING IN MANUFACTURE OF EXCISABLE GOODS TO BE LIABLE TO SERVICE TAX UNDER “BUSINESS AUXILLIARY SERVICES “.

STOCK SUB BROKERS EXEMPT FROM SERVICE TAX

• SERVICES PROVIDED TO INSTALLATIONS,STRUCTURES AND VESSELS IN CONTINENTAL SHELF LIABLE TO SERVICE TAX ( EFFECTIVE FROM 7.7.09)


• EXEMPTION FROM SERVICE TAX (EFFECTIVE FROM7.7.09)

INTER STATE AND INTRA STATE TRANSPORATION OF PASSENGERS IN A VEHICLE BEARING CONTRACT CARRIAGE PERMIT WITH SPECIFIED CONDITION

INTER BANK PURCHASE AND SALE OF FOREX BETWEEN SCHEDULED BANKS

PAYMENT BY EXPORTER TO “GOODS TRANSPORT AGENCY”IN RELATION TO EXPORTS

PAYMENT OF COMMISSION UPTO 10% BY EXPORTERS TO NON-RESIDENTS.


• SIMPLIFICATION OF RULES & PROCEEDURES FOR CLAIM OF SERVICE TAX REFUND BY EXPORTERS:

SIMPLIFIED FORMAT BEING PRESCRIBED

SELF CERTIFICATION TO BE ACCEPTED IN CASE REFUND CLAIM IS LESS THAN 0.25% OF THE F.O.B VALUE OF EXPORTS AND CERTIFICATION BY CHARTERED ACCOUNTANT OF THE ASSESSEE TO BE ACCEPTED IN CASE REFUND CLAIM EXCEEDS 0.25% OF F.O.B.VALUE

CONDITION OF CLAIMING REFUND ONCE IN A QUARTER IS BEING DISPENSED WITH

TERMINAL HANDLING CHARGES ADDED TO LIST OF ELIGIBLE SERVICES


• OTHER AMMENDMENTS

TAXABLE VALUE IN WORKS CONTRACT TO INCLUDE GOODS SUPPLIED FREE OF COST OR SUPPLIED UNDER ANY OTHER CONTRACT. (EFFECTIVE FROM 07.07.09). RESTRICTION NOT TO APPLY TO CURRENT CONTRACTS WHERE EXECUTION HAS COMMENCED OR PAYMENT MADE ON OR BEFORE 07.07.2009.

• PROVIDER OF TAXABLE AND EXEMPT GOODS NOT MAINTAINING SEPARATE ACCOUNTS OF INPUTS TO CHARGE 6% SERVICE TAX ON EXEMPT SERVICES INSTEAD OF 8%.


Other Indirect Taxes


No change in the peak customs rate. Changes in tariff inter alia are as under:

• Customs

Particulars 1V* From ToSet Top Boxes * Exempt 5%LCD Panels * 10% 5%Parts for manufacture of mobile phones and accessories

+ Exempt from special CVD

Unworked corals + 5% Nil10 specified life saving drugs + 10% 5% with Nil CVDSpecified heart devices, namely artificial heart and PDA/ ASD occlusion device

+ 7.5% 5%

Permanent magnets for PM synchronous generator above 500KW used in wind operated electricity generators

+ 7.5% 5%

Bio-diesel + 7.5% 2.5%‘Mechanical harvester’ for coffee plantation + 7.5% 5%

CVD on such harvesters + 8% Nil

Serially numbered gold bars (other than tola bars)

and gold coins

* Rs. 100 per 10Gram Rs. 200 per 10 gram

Other forms of gold * Rs. 250 per 10 Gram Rs. 500 per 10 gram

Silver * Rs. 500 per kg Rs. 1,000 per kgCotton waste and wool waste * 15% 10%

Rock phosphate * 5% 2%


OTHERS:

• LIST OF SPECIFIED RAW MATERIALS/ INPUTS IMPORTED BYMANUFACTURER-EXPORTERS OF SPORTS GOODS WHICH ARE EXEMPT FROM CUSTOMS DUTY, SUBJECT TO SPECIFIED CONDITIONS, TO BE EXPANDED BY INCLUDING FIVE ADDITIONAL ITEMS.

• LIST OF SPECIFIED RAW MATERIALS AND EQUIPMENT IMPORTED BY MANUFACTURER-EXPORTERS OF LEATHER GOODS, TEXTILE PRODUCTS AND FOOTWEAR INDUSTRY WHICH ARE FULLY EXEMPT FROM CUSTOMS DUTY, SUBJECT TO SPECIFIED CONDITIONS, TO BE EXPANDED.

• CONCESSIONAL CUSTOMS DUTY OF 5% ON SPECIFIED MACHINERYFOR TEA, COFFEE AND RUBBER PLANTATIONS TO BE REINTRODUCEDFOR ONE YEAR.

•CVD EXEMPTION ON AERIAL PASSENGER ROPEWAY PROJECTS TO BE WITHDRAWN. SUCH PROJECTS WILL NOW ATTRACT APPLICABLE CVD.


• CUSTOMS DUTY EXEMPTION ON CONCRETE BATCHING PLANTS OF CAPACITY 50 CUM PER HOUR OR MORE TO BE WITHDRAWN.SUCH PLANTS WILL NOW ATTRACT CUSTOMS DUTY OF 7.5%.

• ON PACKAGED OR CANNED SOFTWARE, CVD EXEMPTION TO BE PROVIDED ON THE PORTION OF THE VALUE WHICH REPRESENTS THE CONSIDERATION FOR TRANSFER OF THE RIGHT TO USE SUCH SOFTWARE, SUBJECT TO SPECIFIED CONDITIONS.

• CUSTOMS DUTY ON INFLATABLE RAFTS, SNOW-SKIS, WATER SKIS, SURF-BOATS, SAIL-BOARDS AND OTHER WATER SPORTS EQUIPMENT TO BE FULLY EXEMPTED


• ExciseThere is no change in the CENVAT rate of 1 4%. Changes proposed vis-à-vis excise tariff inter alia are as under:

•Rate Structure

Excise duty rate on items currently attracting 4% to be raised to 8% with certain exceptions for essential items

•Automobile Sector

Specific component of excise duty applicable to large cars/ utility vehicles of engine capacity 2000 cc and above to be reduced from Rs. 20,000 per vehicle toRs. 15,000 per vehicle.

Excise duty on petrol driven trucks/ lorries to be reducedfrom 20% to 8%. Excise duty on chassis of such trucks/lorries to be reduced from ‘20% + Rs. 10,000’ to‘8% + Rs. 10,000’.


•Petroleum Sector

. EXCISE DUTY ON SPECIAL BOILING POINT SPIRITS TO BE REDUCED TO 14%.

. EXCISE DUTY ON NAPHTHA TO BE REDUCED TO 14%.

. DUTY PAID HIGH SPEED DIESEL BLENDED WITH UPTO 20% BIO-DIESEL TO BE FULLY EXEMPTED FROM EXCISE DUTIES.

. THE AD VALOREM COMPONENT OF EXCISE DUTY OF 6% ON PETROL INTENDED FOR SALE WITH A BRAND NAME TO BE CONVERTED INTO A SPECIFIC RATE OF RS. 14.50 PER LITRE INSTEAD OF ‘6% + RS. 13 PER LITRE’.

. THE AD VALOREM COMPONENT OF EXCISE DUTY OF 6% ON DIESEL INTENDED FOR SALE WITH A BRAND NAME TO BE CONVERTED INTO A SPECIFIC RATE OF RS. 4.75 PER LITRE INSTEAD OF ‘6% + RS. 3.25 PER LITRE’.


•Textiles

. EXCISE DUTY ON MANMADE FIBRE AND YARN TO BE INCREASED FROM 4% TO 8%.

. EXCISE DUTY ON PTA AND DMT TO BE INCREASED FROM 4% TO 8%.

. EXCISE DUTY ON POLYESTER CHIPS TO BE INCREASED FROM 4% TO 8%.

. EXCISE DUTY ON ACRYLONITRILE TO BE INCREASED FROM 4% TO 8%.

. THE SCHEME OF OPTIONAL EXCISE DUTY OF 4% FOR PURE COTTON TO BE RESTORED. . EXCISE DUTY FOR MAN-MADE AND NATURAL FIBRES OTHER THAN PURE COTTON, BEYOND THE FIBRE AND YARN STAGE, TO BE INCREASED FROM 4% TO 8% UNDER THE EXISTING OPTIONAL SCHEME.

. AN OPTIONAL EXCISE DUTY EXEMPTION TO BE PROVIDED TO TOPS OF MANMADE FIBRE MANUFACTURED FROM DUTY PAID TO BE AT PAR WITH TOPS MANUFACTURED FROM DUTY PAID STAPLE FIBRE.

. SUITABLE ADJUSTMENTS TO BE MADE IN THE RATES OF DUTY APPLICABLE TO DTA CLEARANCES OF TEXTILE GOODS MADE BY EXPORT ORIENTED UNITS USING INDIGENOUS RAW MATERIALS/ INPUTS FOR MANUFACTURE OF SUCH GOODS.


•Miscellaneous

. FULL EXEMPTION FROM EXCISE DUTY TO BE PROVIDED ON GOODS OF CHAPTER 68 OF CENTRAL EXCISE TARIFF MANUFACTURED AT THE SITE OF CONSTRUCTION FOR USE IN CONSTRUCTION WORK AT SUCH SITE.

. EXCISE DUTY EXEMPTION ON ‘RECORDED SMART CARDS’ AND ‘RECORDED PROXIMITY CARDS AND TAGS’ TO BE MADE OPTIONAL. MANUFACTURERS HAVE THE OPTION TO PAY THE APPLICABLE EXCISE DUTY AND AVAIL THE CREDIT OF DUTY PAID ON INPUTS.

. EVA COMPOUND MANUFACTURED ON JOB WORK FOR FURTHER USE IN MANUFACTURE OF FOOTWEAR TO BE EXEMPTED FROM EXCISE DUTY.

. BENEFIT OF SSI EXEMPTION SCHEME TO BE EXTENDED TO PRINTED LAMINATED ROLLS BEARING THE BRAND NAME OF OTHERS BY EXCLUDING THIS ITEM FROM THE PURVIEW OF THE BRAND NAME RESTRICTION.

. ON PACKAGED OR CANNED SOFTWARE, EXCISE DUTY EXEMPTION TO BE PROVIDED ON THE PORTION OF THE VALUE WHICH REPRESENTS THE CONSIDERATION FOR TRANSFER OF THE RIGHT TO USE SUCH SOFTWARE, SUBJECT TO SPECIFIED CONDITIONS. '

. EXCISE DUTY ON BRANDED ARTICLES OF JWELLERY TO BE REDUCED FROM 2% TO NIL.


Disclaimer:

• This publication is intended as a service to clients and to provide clients with the details of the budget proposals, it has been prepared for general guidance of interest only, and does not constitute professional advice.

• No person should act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (expressed or implied) is given as to the accuracy or completeness of the information contained in this publication

• Sushil Budhia Associates, its members, employees and agents accept no liability, and disclaim all responsibilities, for the consequences of any person acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it

• This publication is for private circulation only.


the union budget 2009-10 sushil budhia associates chartered accountants 106/107 shrikant chambers...

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