With a view to encourage power generation and reduce transmission and distribution losses Finance Minister Pranab Mukherjee today extended the tax holiday for the power sector by one more year till March 31, 2012. The extension of tax break is part of the government’s efforts to scale up the country’s power generation capacity to meet the growing needs.
The 2011-12 Budget has failed to bring cheer to the Indian IT sector as Finance Minister Pranab Mukherjee did not make any major announcements to boost the segment. IT companies were batting for reduced tax rates and continuation of sops under the STPI to help the industry, which is seeing a recovery in demand after almost two years of slowdown.
The government today proposed to increase the service tax on life insurance policies to 1.5 per cent from 1 per cent, a move that would increase the premium cost for policyholders. “It is being provided that tax shall be charged in the portion of the premium… the composition rate is also being increased from 1 per cent to 1.5 per cent,” Finance Minister Pranab Mukherjee said in his 2011-12 Budget speech.
To reduce compliance burden of small taxpayers, Finance Minister Pranab Mukherjee today proposed to introduce a new simplified income tax return form ‘Sugam’. “I propose to introduce a new simplified return form ‘Sugam’ to reduce the compliance burden of small taxpayers who fall within the scope of presumptive taxation,” Mukherjee said in his Budget speech.
The cost of branded garments and made-up textiles will go up by 10-15 per cent with imposition of excise duties as proposed in the Budget. Readymade garments and made-up textiles are currently under optional excise duty regime. But Finance Minister Pranab Mukherjee today proposed in his Budget mandatory imposition of 10 per cent duty on this segment.
Exporters will be allowed to do self-assessment of their duty liabilities before the customs authorities, besides getting service tax refunds through a hassle-free mechanism. “To quicken the clearance of the cargo by customs authorities and further modernise the customs administration, I propose to introduce self-assessment in customs,” Finance Minister Pranab Mukherjee said in his Budget speech today.
Looking at improving investment climate for corporates, Finance Minister Pranab Mukherjee today proposed halving tax on dividends received by an Indian company from its foreign subsidiary to 15 per cent. “It has been represented that the taxation of foreign dividends in the hands of resident taxpayers at full rate is a disincentive for their repatriation to India and they continue to remain invested abroad. For the year 2011-12, I propose a lower rate of 15 per cent tax on dividends,” Mukherjee said in his Budget speech.
Foreign entities will now be able to invest directly in mutual funds, which will increase the fund flow into capital markets. The fund houses will have to ensure know-your-customer (KYC) norms before seeking investment from overseas investors, Finance Minister Pranab Mukherjee said while unveiling the Budget for 2011-12.
Mobile handset prices will become more expensive as Finance Minister Pranab Mukherjee today announced one percent hike in the Central Excise duty for 130 items, including phones.Come April 1 and central excise duty on mobile phones will be raised from the current four per cent to five per cent.
Salary earners having an income of less than Rs 5 lakh will not have to file tax returns from this year. “Salaried people, may be up to Rs 5 lakh…they need not file the (income tax) return,” CBDT chairman Sudhir Chandra said. The exemption from filing tax returns come into effect from the assessment year 2011-12. The decision, which will come into effect from June 1, 2011, will reduce the compliance burden on small taxpayers, it added.
