Tax Proposals in the Budget of year 2011-12

*Direct Taxes*

• Exemption limit for the general category of individual taxpayers enhanced from 1,60,000 to Rs.  1,80,000 giving uniform tax relief of Rs.  2,000.

• Exemption limit enhanced for Senior Citizen to Rs 250000 and qualifying age reduced for senior citizens from 65 to 60 Years. 

• Higher exemption limit of Rs 500000 for Very Senior Citizens, who are 80 years or above.

• Current surcharge of 7.5 per cent on domestic companies proposed to be reduced to 5 per cent.

• Rate of Minimum Alternative Tax proposed to be increased from 18 per cent to 18.5 per cent of book profits.

• Tax incentives extended to attract foreign funds for financing of infrastructure.

• Additional deduction of  Rs. 20,000 u/s 80C for investment in long-term infrastructure bonds proposed to be extended for one more year.

• Lower rate of 15 per cent tax on dividends received by an Indian company from its foreign subsidiary.

• Benefit of investment linked deduction extended to businesses engaged in the production of fertilisers.

• Investment linked deduction to businesses developing affordable housing.

• Weighted deduction on payments made to National Laboratories, Universities and Institutes of Technology to be enhanced to 200 per cent.

• System of collection of information from foreign tax jurisdictions to be strengthened.

• A net revenue loss of Rs.  11,500 crore estimated as a result of proposals.

*Indirect Taxes*

• To stay on course for transition to GST.

• Central Excise Duty to be maintained at standard rate of 10 per cent.

• Reduction in number of exemptions in Central Excise rate structure.

• Nominal Central Excise Duty of 1 per cent imposed on 130 items entering in  the tax net.

• Lower rate of Central Excise Duty enhanced from 4 per cent to 5 per cent.

• Optional levy on branded garments or made up proposed to be converted into a mandatory levy at unified rate of 10 per cent.

• Peak rate of Custom Duty held at its current level.

*Service Tax*

• Standard rate of Service Tax retained at 10 per cent, while seeking a closer fit between present regime and its GST successor.

• Hotel accommodation in excess of Rs.  1,000 per day and service provided by air conditioned restaurants that have license to serve liquor added as new services for levying Service Tax.

• Tax on all services provided by hospitals with 25 or more beds with facility of central air  conditioning.

• Service Tax on air travel both domestic and international raised.

• Services provided by life insurance companies in the area of investment and some more legal services proposed to be brought into tax net.

• All individual and sole proprietor tax payers with a turn over upto  Rs. 60 lakh freed from the formalities of audit under Service Tax.

• To encourage voluntary compliance the penal provision for Service Tax are being rationalised. Similar changes being carried out in Central Excise and Custom laws.

• Proposals relating to Service Tax estimated to result in net revenue gain of  Rs. 4,000 crore.

• Proposals relating to Direct Taxes estimated to result in a revenue loss of Rs. 11,500 crore and those related to Indirect Taxes estimated to result in net revenue gain of Rs.  11,300 crore.

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  (Author – Amit Bajaj Advocate, Bajaj & Bajaj Advocates, 128, Sangam complex, Milap chowk, Jalandhar City (Punjab), Email: amit@amitbajajadvocate.com, M +919815243335)
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