Professional Topics, Taxation

Union Budget 2010-11 Highlights

The much awaited (as always) Union Budget was kept before the Parliament by the Finance Minister Shri.  Pranab Mukherjee on 26th February 2010, which can be termed as a relief oriented budget.  This time, however, the aspirations were high due to the global economic meltdown.  The year 2009-10 has been a very difficult and testing year for India.  The FM had to take certain stern steps and had to keep in mind the fiscal deficit before coming out with the proposal.  Fiscal deficit was seen at 4.8 per cent and 4.1 per cent in 2011-12 and 2012-13 respectively as per the Economic Survey.

Salient features of the Budget 2010-2011 in Taxation:

Direct Taxes:

  • FM prunes tax rates:
    Income up to Rs 1.6 lakh – Nil, Income above Rs 1.6 lakh and up to Rs 5 lakh – 10 per cent
    Income above Rs 5 lakh and up to Rs 8 lakh – 20 per cent
    Income above Rs 8 lakh – 30 per cent.

New tax rates would offer relief to 60 per cent of tax-payers.

The increase of minimum personal taxation slab of 10% up to Rs. 5.00 lacs will pave the way for better tax compliances and revenue generation for the Government.

  • Income Tax department ready with two—page Saral—2 return forms for individual salaried assesses.  The introduction of SARAL II Form will enable the small tax payers to file their return without difficulty.
  • The relief upto Rs. 20,000/- under 80 CCE would suitably boost infrastructure sector while simultaneously providing tax relief.  This deduction is in addition to the deduction limit of Rs. 1,00,000 already allowed under section 80C.
  • The Budget has given some thrust to conversion into LLP (Limited Liability Partnership) without attracting Capital Gains Tax. However, the restrictions and preconditions may be reviewed to provide full benefit to the conversion of such entities.
  • While he has left the base rate of 30% the same for corporate taxes, he has cut the surcharge from 10% to 7.5%.  This marginal reduction of surcharge will give relief to corporate entities and partially offset the increase in MAT Tax which is raised from 15% to 18% of book profits.
  • The thrust given on research and development by enhancing the weighted deduction from 150% to 200% is welcome since it will boost research activity.
  • No disallowance under S-40(a)(ia)  will be made if after deduction of tax during the entire previous year, the same has been paid on or before the due date of filing of return of income specified in sub-section (1) of section 139.
    Removal of genuine hardships in this area of TDS is welcome.  This amendment is proposed to take effect from the Assessment Year 2010-11 and subsequent years.
  • Implementation of the much talked about Direct Tax Code from April 2011.
  • FBT (Fringe Benefit Tax) remains withdrawn.

Indirect Taxes:

  • The increase in Central Excise Rates by 2% would augment tax revenues while bringing convergence with GST rates.
  • Procedural reforms in placing reliance on CA’s certificates for input credits, amendment in demand provision would reduce litigation and give widespread relief.
  • Certain accredited news agencies exempted from service tax.
  • Service tax to remain 10 per cent.
  • 10 per cent central excise duty on all non-petroleum products.
  • 7.5 per cent duty on petrol, diesel, crude restored.  Hence petroleum prices will rise.
  • Government is actively engaged in finalising structure of Goods & Service Tax (GST Act) regime; hopes to implement it from April 2011.

The Budget skillfully balances the need to step up the economic growth on one side, check inflation on the other side and also address the socio-economic needs of the nation.  I welcome the Budget however the fiscal deficit and food inflation control measures have to be taken.

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