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NO CHANGE IN INCOME TAX SLABS PERSONS HAVING TAXABLE INCOME UPTO RS. 1,00,000/- NOT TO PAY ANY TAX EDUCATION CESS @ 2% IS TO BE LEVIED ON THE TAX

The slabs for purpose of computing income tax remains the same, while persons having taxable income of Rs. 1,00,000/- will not be required to pay income tax. A person having taxable income exceeding Rs. 1,00,000/- will now be required to pay in addition to income tax (after rebate under Chapter VIII-A), an education cess at the rate of two per cent. These are some of the salient features of the direct tax proposals announced by the Finance Minister, Shri P. Chidambaram while presenting the General Budget for 2004-05 in the Lok Sabha today. The tax proposals also specify that a person having income exceeding Rs. 8,50,000/- in this slab would be required to pay 10% surcharge on the total income tax payable after the rebate under Chapter VIII-A, and also the education cess @ 2%. For example, a resident individual with a taxable income of Rs. 1,00,000/-(after standard deductions at the old rate) will not be required to pay any income tax, while a person having a taxable income of Rs. 1,50,000/- will have to pay now an income tax of Rs. 19,380/- (including the education cess). An individual having an taxable income of Rs. 8,50,000/- will have to pay an income tax of Rs. 2,33,580/-, (Rs. 4,580/- more than what he paid last year).

Family pension received by widows, children and nominated heirs of members of the armed forces and the paramilitary forces killed in action will be exempt from income tax. The tax proposals also specify that benefit of Section 80DD and Section 80U is to be extended in respect of persons suffering from autism, cerebral palsy and multiple disability. Compensation for acquisition of agricultural land in certain urban agglomerations is to be exempt from capital gains tax in such cases where the compensation or the enhanced compensation has been received on or after April 1, 2004.

Gifts from unrelated persons above the limit of Rs. 25,000/- is to be taxed as income while gifts received from blood relations, lineal ascendants and lineal descendants and gifts received on the occasion of marriage upto a limit of Rs. 1,00,000/- will continue to be exempt from tax computation.

Tax on long-term capital gains from securities transactions is to be abolished and instead a tax on transactions in securities on stock exchanges is to be levied on the buyer at the rate of 0.15 per cent of the security value. This means that a transaction involving securities valued at Rs. 1,00,000/- will now bear a small tax of Rs. 150/- and this will be levied on the buyer. The rate of tax on short-term capital gains from securities has been reduced to a flat rate of 10 per cent. Announcing these measures, the Finance Minister further said that out of nearly 3 crore 40 lakh persons filing income tax returns, only 2 crore 70 lakh assessees are tax payers and the new proposals will give relief to 1 crore 40 lakh assessees. He assured the House that if the tax compliance improves, he may revisit the subject.

TAX TO BE DEDUCTED AT SOURCE FROM COMPENSATION PAID ON ACQUISITION OF IMMOVABLE PROPERTY

The budget for 2004-05 proposes to make provision for deduction of tax at the rate of 10 per cent on the amount of compensation paid to the owners for acquiring their land or residential buildings by various agencies including the Government and local authorities. Announcing the new provision, the Finance Minister, Shri P. Chidambaram said, this has been done to curb the tendency of evading taxes by not reporting the income comprised in the compensation. However, no deduction of tax shall be made where the immovable property acquired is agricultural land, situated within Municipal limit or not and where the amount of compensation paid is less than Rs. 1 lakh. The new provision shall come into effect from October 1, 2004.

TAX HOLIDAY FOR AGRO-PROCESSING INDUSTRY


Agro-based industry in the country is an important source of employment, especially in rural areas. The budget presented to Parliament by the Finance Minister, Shri P. Chidambaram today proposes to provide 100 per cent deduction under Section 80-1B for 5 years and 25 per cent deduction for the next 5 years from profits derived by undertakings engaged in processing, preservation and packaging of fruits and vegetables. The deduction will be available from the assessment year relevant to the previous year in which the undertaking starts such business. The new provision will come into effect from April 1, 2005 and will apply in relation to assessment year 2005-06.

As per the existing provision of Section 80-1B, deduction is only available in respect of profits and gains of undertakings engaged in refining or production of mineral oil, undertakings engaged in developing and building housing projects and those engaged in integrated business of handling, storage and transportation of foodgrains.

PROVISIONS IN THE NEW PENSION SCHEME

A new pension scheme for new entrants into Central Government Service has come into effect from January 1, 2004. The budget for 2004-05 presented in Parliament by the Finance Minister, Shri P. Chidambaram today proposes to insert a new Section 80CCD to provide for deduction from the total income of an individual employed by the Government on or after January 1, 2004, of amounts paid by him in the pension account subject to a maximum of ten per cent of his salary. The scheme provides further that the terminal benefits shall be taxed as income in the year in which such amounts are received by the assessee or his nominee on closure of the account or while opting out of the said scheme.

SERVICE TAX RATES INCREASED BY TWO PERCENT

The new Budget presented in the Parliament today proposes to raise the Service Tax from existing 8 per cent to 10 per cent. In addition, an Education Cess is also being levied on services subjected to service tax, and will be chargeable at the rate of two per cent of the service tax.

The services on which Service Tax is being imposed include Business exhibition services; Airport services; Transport of goods by road (by a goods transport agency); Transport of goods by air; Survey and exploration of minerals; Opinion poll services; Intellectual property services other than copyrights; Forward contract service; Pandal or Shamiana service; Outdoor catering; TV or radio programme production; Construction services in respect of commercial or industrial buildings or civil structures; Travel agents (other than air/rail travel agents).

The Budget also proposes to extend credit of service tax and excise duty across goods and services.

INDIA’S TARIFF STRUCTURE TO BE ALLIGNED TO ASEAN COUNTRIES

The new Budget, presented in the Parliament today, expresses the Government’s intention to align India’s tariff structure to those of ASEAN countries. The Finance Minister, Shri P. Chidambaram, reiterated the policy signal that customs duties will be brought down in a measured way. Eventually, there should be a uniform rate of tax on goods and services. The Finance Minister also said that the process of adjusting excise duties and moving them towards a Central VAT rate must continue.

CUSTOMS DUTY ON NON-ALLOY STEEL REDUCED

The new Budget presented in the Parliament today proposes to reduce customs duty on non-alloy steel from existing 15 per cent to 10 per cent while the excise duty on steel is to be increased from existing 8 per cent to 12 per cent so that the countervailing duty is also applicable to imports.

The peak rate on alloy steel, copper, lead, zinc and base metals is proposed to be reduced to 15 per cent. These are basic raw materials used in a variety of industries. Customs duties on refractory raw minerals and mineral products like graphite, asbestos, mica and gypsum is also proposed to be reduced to 15 per cent. Besides, customs duty on all catalysts will also be 15 per cent.

CUSTOMS DUTY ON REFINED PALM OIL INCREASED

The Budget presented in Parliament today proposes to increase the customs duty on refined palm oil from 70 per cent to 75 per cent. This is in tune with the recommendation of the Tariff Commission. On the other hand, with a view to encourage value addition, the customs duty on crude palm oil has been retained at 65 per cent. The measure comes as part of the concessions to the agriculture sector. The Budget also proposes that customs duty of 5 per cent on some items of plantation machinery be extended to more items pertaining to the tea and coffee plantation sector.