NEW DELHI: In keeping with Prime Minister Manmohan Singh's commitment that tax rates would be "moderate" and not "confiscatory" in approach, Finance Minister P. Chidambaram brought cheer for the corporates and the aam aadmi by not levying any fresh taxes. Neither did he announce any changes in the corporate and income-tax rates while presenting the Budget for 2006-07 in the Lok Sabha on Tuesday.

However, to ensure that adequate revenue is generated during the ensuing fiscal, Mr. Chidambaram increased the rate of service tax to 12 per cent from 10 per cent and added 15 more services to the existing list of 81. However, the number of services covered under the tax net will stand increased to 99 after the addition of more services and withdrawal of exemptions extended earlier.

Mr. Chidambaram argued that since the services sector contributed as much as 54 per cent to the country's gross domestic product, it was only fair that its contribution to the Central exchequer was also higher than now.

Against the target of Rs. 17,500 crore pegged in the Budget for the current fiscal, the Government is poised to mop up Rs. 23,000 crore as per revised estimates. Enthused by this development, the revenue target for service tax alone for 2006-07 has been increased to Rs. 34,500 crore.

The increased service tax rate would be applicable from the date of enactment of the Finance Bill 2006, Mr. Chidambaram said.

In all, the 15 new services brought under the tax net include share transfer agents, registrars, ATMs, sale of space for advertisement other than in print media, sponsorship of events other than sports, international air travel (other than economy class), public relations (PR) services and internet telephony, among others. Credit card, debit card and other payment card related services have also been brought under the ambit of the tax.

Mr. Chidambaram also withdrew exemption from service tax for six services, including call centre, re-insurance premium received from both domestic and overseas and others. This is to come into effect from March 1.

Personal income tax

As for personal income tax, Mr. Chidambaram abolished the one-by-six scheme under the Income-Tax Act which obliged certain categories of persons to file returns.

Also, in response to the demand for tax exemption on fixed deposits of a certain tenure, the Minister proposed to include investments in fixed deposits in scheduled banks for a term of not less than five years under Section 80C of the I-T Act.

He also sought to remove the limit of Rs. 10,000 in respect of contribution to certain pension funds under Section 80CC, subject to the overall ceiling of Rs. 1 lakh.

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