The Hindu : Business : Relief for incomes below Rs. 1 lakh hailed

Online edition of India's National Newspaper
Friday, Jul 09, 2004

Business

Business

Relief for incomes below Rs. 1 lakh hailed

By S. Rajaratnam

CHENNAI, JULY 8. The expectation from Budget 2004 in respect of enhancement of the basic exemption limit has not fructified. A new Section 88D in the Income-tax Act is proposed which will provide for rebate of the entire amount of tax payable in the case of resident individuals having total income up to Rs. 1 lakh. For income above this limit there is no relief as the existing slabs and rates will remain.

Individual taxation

Any receipt by an individual or Hindu Undivided Family, otherwise than by way of sale or service or a gift from relatives specified in the statute, will be taxable. This has become necessary as an anti-avoidance measure to deal with bogus foreign gifts.

Section 80U and 80DD meant for disabled persons and those supporting them are proposed to be extended to some more serious illnesses, which had earlier been left out.

Family pension for war widows and the bereaved family members is proposed to be exempt.

Corporate sector

The corporate sector may be disappointed because it has to get itself reconciled to Minimum Alternate Tax without the tax credit for such tax, so as to relieve the element of double taxation inherent in shift from one system to another. Such tax credit was conceded under Section 115JAA available for AYs 1999-2000 and 2000-01. At least, this could be restored.

Some companies may be saddled with further liability in respect of dividend from mutual funds in view of proposed amendment to Section 115R by way of increase in distribution tax from 12.5 to 20 per cent. It is probably felt that mutual funds should not be treated as a parking lot for saving tax, since they are primarily intended for individuals and Hindu Undivided Families. But the corporate sector has reason to be happy because of the removal of tax on long term capital gains on listed shares with tax on short term capital gains limited to 10 per cent. This should encourage capital market. The turnover tax on share dealings proposed at 0.15 per cent would, no doubt, affect even those who lose in the stock market, but this is a smaller price for the concessions.

Incentives

Time limit for starting new undertakings covered by Section 80IA and 80IB is extended in almost all cases. Concession for property development under Section 80IB(10) is proposed to be liberalised. Industry in J&K will have the same privilege as those in North Eastern States, Uttaranchal and Himachal Pradesh.

Service tax

The proposed enhancement of service tax from 8 to 10 per cent and extension to a few more insignificant sectors, besides the extension of tax collection at source for parking lots, toll plazas, mining and quarry at 2 per cent may not be palatable to all.

TDS

The limit for deduction of payments covered by Section 194C has been raised from Rs. 20,000 to Rs. 50,000, but will no longer be transaction-wise but will cover the aggregate amount paid during the whole year including what is anticipated to be paid. Compensation for compulsory acquisition will now require tax deduction at source. Denial of deduction of amounts from which tax is failed to be deducted is extended further. More procedures are prescribed for deductions with more penalties for failures.

Changes galore

There is nullification of two Supreme Court decisions, besides many new provisions in the sixty odd amendments in keeping with the tradition in the past.

(The author is a tax consultant)

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