At A Glance: Direct Taxes

• An additional cess of 1% on all taxes to be levied to fund secondaryeducation and higher education and the expansion of capacity by 54% forreservation for socially and educationally backward classes. 

Personal Income Tax

• Threshold limit of exemption in the case of all assessees to be increased by Rs.10,000 
• In the case of a woman assessee, threshold limit to be increased from Rs.135,000 to Rs.145,000 
• In case of a senior citizen threshold limit to be increased from Rs.185,000 to Rs.195,000  
• Deduction in respect of medical insurance premium under section 80D to be increased to a maximum of Rs.15,000 and, in case of a senior citizen, a maximum of Rs.20,000.

Service Tax 

• Exemption limit for small service providers to be raised from Rs.400,000to Rs.800,000
• Extension of service tax to: services outsourced for mining of mineral, oilor gas; renting of immovable property for use in commerce or business(residential properties, vacant land used for agriculture and similar purposes,and land for sports, entertainment and parking purposes & immovableproperty for educational or religious purposes to be excluded); developmentand supply of content for use in telecom and advertising purposes; assetmanagement services provided by individuals; design services; servicesinvolved in execution of a works contract with an optional compositionscheme under which tax will be levied at only 2% of the total value ofworks contract.
• Exemption to: Services provided by Resident Welfare Associations to theirmembers who contribute Rs.3000 or less per month for services rendered,services provided by technology business incubators, their incubatees whoseannual business turnover does not exceed Rs.50 lakhs to be exempt forfirst three years; clinical trial of new drugs to make India a preferreddestination for drug testing.
• Department of Telecommunications to constitute a committee to study thepresent structure of levies on telecom industry.

Other Direct Taxes

• Rate of dividend distribution tax to be raised from 12.5% to 15% ondividends distributed by companies; and to 25% on dividends paid by moneymarket mutual funds and liquid mutual funds to all investors.
• Surcharge on income tax on all firms and companies with a taxable income of Rs.1 crore or less to be removed.
• Expenditure on free samples and on displays to be excluded from the scopeof Fringe Benefit Tax (FBT); ESOPs to be brought under FBT.
• Tax holiday to undertakings in Jammu & Kashmir to be extended for anotherfive years up to March 31, 2012.
• Minimum Alternate Tax (MAT) to be extended to income in respect ofwhich deduction is claimed under sections 10A and 10B; deduction undersection 36(1)(viii) to be restricted to 20% of profits each year.
• Benefit of Section 36(1)(viii) to be available to cooperative banks; to bealso allowed deduction in respect of provision for bad and doubtful debtsunder section 36(1)(viia); amalgamation and de-merger of bankingcompanies is tax neutral - benefit to be extended to cooperative banks.
• Concessions under section 80IA for infrastructure facilities to be extendedto cross country natural gas distribution network, including gas pipelineand storage facilities integrated to the network; and to navigation channelin the sea.
• To facilitate creation of urban infrastructure, issue of tax-free bonds throughState Pooled Finance Entities formed for raising funds for a group of urbanlocal bodies to be allowed.
• A benign assessment procedure to be introduced for assessees engaged indiamond manufacturing and trading who declare profits from such activitiesat 8% or more of turnover.
• A five year income tax holiday for two, three or four star hotels and forconvention centres with a seating capacity of not less than 3,000; theyshould be completed and begin operations in National Capital Territory ofDelhi or in the adjacent districts of Faridabad, Gurgaon, Ghaziabad orGautam Budh Nagar during April 1, 2007 to March 31, 2010.
• Concession under section 35(2AB) to be extended for five more years untilMarch 31, 2012.
• Pass-through status to be granted to venture capital funds only in respect ofinvestments in venture capital undertakings in biotechnology; informationtechnology relating to hardware and software development;nanotechnology; seed research and development; research and developmentof new chemical entities in the pharmaceutical sector; dairy industry; poultryindustry; and production of bio-fuels, and hotel-cum-convention centresof a certain description and size.
• Limit of Rs.50 lakh per investor per year with respect to capital gains bondsissued by NHAI and REC under section 54EC to continue.
• Cash withdrawals by Central and State Governments to be excluded fromthe scope of Banking Cash Transactions Tax (BCTT); exemption limit forindividuals and HUFs to be raised from Rs.25,000 to Rs.50,000.
• List of declared goods under section 14 of the CST Act to be amended tocover all small aircraft with minimum takeoff mass of less than 40,000 kgsoperated by scheduled airlines.