TaxTMI 
TaxTMI 
Memorandums
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....2. Subject to certain exceptions, which have been indicated while dealing with the relevant provisions, the Bill follows the principle that changes in the provisions of the tax laws, should ordinarily be made operative prospectively in relation to the current incomes and not in relation to the incomes of past years. The substance of the main provisions in the Bill relating to direct taxes is explained in the following paragraphs :- INCOME TAX RATES OF INCOME TAX I. Rates of income-tax in respect of income liable to tax for the assessment year 2006-07 In respect of income of all categories of tax payers (corporate as well as non-corporate) liable to tax for the assessment year 2006-2007, the rates of income-tax have been specified in Part I of the First Schedule to the Bill. These are the same as those laid down in Part III of the First Schedule to the Finance Act, 2005, for the purposes of computation of "advance tax", deduction of tax at source from "Salaries" and charging of tax payable in certain cases. It has also been specified that in the case of individuals, Hindu undivided families, association of persons and body of individuals having total income exceeding Rs.....
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....o the deduction exceeds ten lakh rupees; (ii) in case of every firm, artificial juridical person and domestic company, at the rate of ten per cent. of such tax; (iii) in the case of every company other than a domestic company at the rate of two and one-half per cent. of such tax. No surcharge shall be levied on a cooperative society or a local authority. The additional surcharge, called the "Education Cess on Income tax" so as to fulfil the commitment of the Government to provide universalised quality education, shall be levied at the rate of two per cent. on the amount of tax inclusive of surcharge in all cases. website: http://indiabudget.nic.in 2 III. Rates for deduction of income-tax at source from "Salaries", computation of "advance tax" and charging of income-tax in special cases during the financial year 2006-2007. The rates for deduction of income-tax at source from "Salaries" during the financial year 2006-2007 and also for computation of "advance tax" payable during that year in the case of all categories of tax payers have been specified in Part III of the First Schedule to the Bill. These rates are also applicable for charging income tax durin....
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....ge on total income exceeding ten lakh rupees shall not exceed the total amount payable as income-tax on a total income of ten lakh rupees by more than the amount of income that exceeds ten lakh rupees. In the case of every artificial juridical person, the amount of income-tax computed shall be reduced by the amount of rebate of income-tax calculated under Chapter VIII-A. The income-tax so reduced, shall be increased by a surcharge for purposes of the Union calculated at the rate of ten per cent. of such income-tax. The additional surcharge, called the "Education Cess on Income tax", levied so as to fulfil the commitment of the Government to provide universalised quality basic education at the rate of two per cent. on the amount of tax inclusive of surcharge, is proposed to be continued. B. Co-operative Societies In the case of co-operative societies, the rates of income-tax have been specified in Paragraph B of Part III of the First Schedule to the Bill. These rates are the same as those specified in the corresponding paragraph of Part I of the First Schedule to the Bill and will continue to be same as that for assessment year 2006-2007. No surcharge shall be levied. ....
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....moval of exemption of income from investment in infrastructure and other projects under section 10(23G) Under the existing provisions contained in clause (23G) of section 10, any income by way of dividends, interest or long-term capital gains of an infrastructure capital fund or an infrastructure capital company or a cooperative bank from investments made on or after the 1st day of June, 1998 by way of shares or long-term finance in approved eligible businesses is exempt. Eligible businesses include infrastructure projects, developers of Special Economic Zones, hotel projects of not less than three star category, hospital projects with at least one hundred beds for patients and certain housing projects. This exemption was intended to ensure low cost of raising capital for thrust area projects during an era of high interest rates and high tax rates. The tax rate as well as interest rate for borrowing of funds have since come down, reducing the over all cost of such projects. Exemption for dividends distributed by domestic companies is already available under section 10(34) of the Act. Long- term capital gains from transactions on which Securities Transaction Tax has been paid ....
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...., the tax payers will continue to be eligible for tax credit in respect of income tax paid in a foreign country in accordance with the provisions of section 90 or section 91, as the case may be. This amendment is clarificatory in nature and is inserted in the Income-tax Act on 1st April, 2006. It is further proposed to insert Explanation 2 to provide that any sum paid outside India and eligible for relief of tax under newly inserted section 90A will not be allowed as a deduction in the computation of profits and gains from business or profession. [Clause 10] This amendment will take effect from 1st June, 2006. Interest not 'actually paid' not eligible for deduction under section 43B Under the existing provisions contained in clause (d) and clause (e) of section 43B, any sum payable by the assessee as interest on any loan or borrowing or advance referred to in the said clauses is allowed as deduction in the computation of income if the sum payable as interest is 'actually paid' by the assessee. It is proposed to insert two new Explanations, namely, Explanation 3C and Explanation 3D to clarify that if any sum payable by the assessee as interest on any loan or bor....
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....to in sub-clause (iia) of Clause (24) of section 2, where a person receiving such contribution does not maintain a record consisting of the identity of the person making such contribution indicating the name and address of the person and such other particulars as may be prescribed. Consequential amendments are proposed to be made in section 10(23C) and section 13 so as to provide that any income by way of any anonymous donation which is taxable under the provisions of the proposed new section 115BB shall not be excluded from the total income of the assessee. These amendments will take effect from 1st April, 2007 and will accordingly apply in relation to assessment year 2007-2008 and subsequent years. Consequential amendments are also proposed to be made in sub-clause (iia) of clause (24) of section 2 to include voluntary contributions received by certain educational and medical institutions in the definition of income. The amendment is retrospective in the case of some institutions. [Clauses 3, 4, 6 and 22] Change in definition of 'long-term specified asset' for exemption under section 54EC Under the existing provisions of section 54EC capital gains arising form t....
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.... section. This amendment will take effect from 1st April, 2007 and will, accordingly, apply in relation to the assessment year 2007-2008 and subsequent years. [Clause 14] website: http://indiabudget.nic.in 5 Rationalisation of provisions relating to Minimum Alternate Tax Section 115JB provides that, in case of a company, if the tax payable on the total income as computed under the Income-tax Act in respect of any previous year relevant to the assessment year commencing on or after the 1st April, 2001 is less than seven and one-half per cent. of its book profit, such book profit shall be deemed to be the total income of the assessee and the tax payable for the relevant previous year shall be seven and one-half per cent. of such book profit. Since the credit for MAT paid under section 115 JB has been introduced from assessment year 2006-07 by Finance Act 2005, and the period for availing the MAT credit is proposed to be increased from five years to seven years, it is proposed to amend sub- section (1) of the said section to provide that if the income-tax payable on the total income as computed under the Income-tax Act in respect of any previous year relevant to t....
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.... revenue on account of claim of higher depreciation through revaluation of assets by certain companies, it is proposed to insert a new clause (g) in the aforesaid Explanation so as to provide that the book profit shall be increased by the amount of depreciation debited to the profit and loss account and to also insert a new clause (iia) in the said Explanation so as to provide that the amount of depreciation claimed in the profit and loss account, excluding the claim of depreciation on account of revaluation of assets, shall be reduced from the book profit. With a view to avoid double taxation on this account, it is also proposed to insert a new clause (iib) in the said Explanation so as to provide that the amount withdrawn from revaluation reserve and credited to the profit and loss account, to the extent it does not exceed the amount of depreciation on account of revaluation of assets referred to in the proposed new clause (iia), shall be reduced from the book profit. The proposed amendments to section 115 JB and clause (38) of section 10 will take effect from 1st April, 2007 and will, accordingly, apply in relation to the assessment year 2007-2008 and subsequent years. [Claus....
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....at par with other commercial banks, which do not enjoy any tax benefit. It is, therefore, proposed to amend section 80 P by inserting a new sub-section (4) so as to provide that the provisions of the said section shall not apply in relation to any co-operative bank other than a primary agricultural credit society or a primary co-operative agricultural and rural development bank. It is also proposed to define the expressions "co-operative bank", "primary agricultural credit society" and "primary co-operative agricultural and rural development bank". It is also proposed to insert a new sub-clause (viia) in clause (24) of the said section so as to provide that the profits and gains of any business of banking (including providing credit facilities) carried on by a co-operative society with its members shall be included in the definition of 'income'. This amendment will take effect from 1st April, 2007 and will, accordingly, apply in relation to the assessment year 2007-2008 and subsequent years. [Clauses 3 and 19] Method for allocating expenditure in relation to exempt income Under the existing provisions of section 14A, it has been provided that for the purposes of computi....
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....ontinuance thereof under any of these sub-clauses shall have to be filed at any time during the financial year immediately preceding the assessment year from which such exemption is sought. Such application cannot be made for any earlier period. The proposed amendment shall apply only in respect of applications which are made on or after 1st June, 2006. This amendment will take effect from 1st June, 2006. [Clause 4] Credit for payment of Minimum Alternate Tax (MAT) and tax paid in a country or specified territory outside India for the purposes of charge of interest under sections 234A, 234B and 234C Under the existing provisions of sections 234A, 234B and 234C, the assessee is held liable to pay simple interest at the rate of one per cent. for every month or part of a month for default in furnishing return of income, for default in payment of advance tax and for deferment of advance tax respectively. For the purposes of computing interest, credit for advance tax paid and tax deducted or collected at source is allowed. MAT credit under section 115JAA, relief of tax under section 90 and deduction from income-tax payable under section 91 are not taken into account while ch....
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....der to mandate payment of interest on self-assessment basis, it is proposed to amend sub-section (1A) of section 201 so as to provide that the person, the principal officer and the company referred to in sub-section (1) of the aforesaid section and liable to pay interest under the said sub-section (1A) shall pay such interest before furnishing the quarterly statement for each quarter in accordance with the provisions of sub-section (3) of section 200. On similar lines it is also proposed to amend sub-section (7) of section 206C so as to provide that the person responsible for collection of tax and liable to pay interest under the said sub-section (7) shall pay such interest before furnishing the quarterly statement for each quarter in accordance with the provisions of sub-section (3) of that section. These amendments will take effect from 1st June, 2006. It is also proposed to insert a new sub-section (6A) in section 206C to provide that any person responsible for collecting tax shall be deemed to be an assessee in default if such person does not collect the whole or any part of the tax or fails to pay such tax after having collected the tax. This amendment will take effec....
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....ons of sub-section (3) of section 200 or proviso to sub-section (3) of section 206C as furnishing of annual returns is proposed to be discontinued. The amendment in relation to doing away with annual returns of tax deduction or collection at source under sections 206 and 206C will take effect from 1st April, 2006 and other amendments to sections 139A and 272A take effect from 1st June, 2006. [Clauses 32, 44, 46, 47 and 53] Clarificatory amendment regarding the time limit for issue of notice under section 142 The existing provisions contained in sub-section (1) of said section, inter-alia, provide that for the purposes of making assessment in a case where a person has not made a return of his income within the time specified under sub-section (1) of section 139, the Assessing Officer may serve a notice under the said sub-section on such person requiring him to furnish the return of his income in the prescribed form and manner. It is proposed to amend clause (i) of sub-section (1) so as to provide that in a case where a person has not made a return of his income before the end of the relevent assessment year, the Assessing Officer may serve a notice after the end of th....
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....e proviso to clause (ii) of sub-section (2) of section 143, but before the expiry of the time limit for making the assessment, reassessment or re-computation as specified in sub-section (2) of section 153, such notice shall be deemed to be valid notice. These amendments will take effect retrospectively from the 1st October, 1991. It is also proposed to insert an Explanation in sub-section (1) so as to clarify that the provisions of the newly inserted first proviso or the second proviso shall not apply in relation to any return which has been furnished on or after 1st October, 2005 in response to a notice served under sub-section (1) of section 148. [Clause 36] This amendment will take effect retrospectively from the 1st October, 2005. Reduction of the time limits provided for completion of assessment and reassessment The existing provisions of section 153 provide the time limit for completion of assessments and reassessments. Section 153B of the Income-tax Act provides the time limit for completion of assessment in cases where search has been initiated under section 132 or books of account, other documents or any assets have been requisitioned under section 132A. ....
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....ee. The first proviso to sub-section (4) provides that where the total income of an assessee as computed by the Assessing Officer is higher than the income declared by the assessee, no deduction under section 10A or section 10B or under Chapter VI-A shall be allowed in respect of the amount of income by which the total income of the assessee is enhanced after computation of income under this sub-section. Sections 10A and 10B provide deductions in respect of the profits and gains derived from exports. Section 10AA also provides for deduction of profits and gains derived from exports, in respect of newly established units in Special Economic Zones. With a view to rationalise the provisions of sub-section (4) of section 92C, it is proposed to amend the first proviso to the said sub-section so as to provide that no deduction under section 10AA shall be allowed in respect of the amount of income by which the total income of the assessee is enhanced after computation of income under sub-section (4). This amendment will take effect from 1st April, 2007 and will, accordingly, apply in relation to the assessment year 2007-08 and subsequent years. [Clause 21] website: http://indiabu....
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.... certificates, statements or other documents referred to in sub-section (2) of section 203A, quotes a number which is false and which he either knows or believes to be false or does not believe to be true, such person shall pay by way of penalty a sum of ten thousand rupees. Further, under the existing provisions contained in sub-section (2), no penalty can be imposed unless the person concerned has been given a reasonable opportunity of being heard. It is proposed to amend sub-section (2) so as to include a reference of sub-section (1A) therein for the purpose of giving an opportunity of being heard to the person on whom the penalty is to be imposed under the said sub-section (1A). These amendments will take effect from 1st June, 2006. [Clauses 54 and 55] Penalty for failure to collect tax at source No penalty is so far specified under the Income-tax Act for failure to collect tax at source. Subsequent to expansion of the provisions of tax collection at source, Board has been receiving information from various quarters that in a number of cases collection of tax was not being made by the persons responsible for collecting tax. It is, therefore, proposed to ins....
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.... after 1st April, 2006. A substantial number of deductors, have not started filing their quarterly statements which they are required to furnish under sub-section (3) of section 200 and under the proviso to sub-section (3) of section 206C. Quarterly statements are the primary documents from which details of tax deducted at source or tax collected at source are captured in the Departmental system. The On-Line Tax Accounting System (OLTAS) is yet to fully stabilize as failure to quote, and in many cases quoting of false PAN and TAN have resulted in getting the taxes deducted or collected or paid getting credited to the suspense account. The dematerialisation system is dependent upon filing of TDS or TCS statements by all the deductors or collectors with correct PAN and TAN in all the TDS and TCS statements and challans. Until all taxes deducted, collected or paid are matched in the OLTAS and complete information is populated in the deductees' or collectees' account, dematerialisation cannot fully substitute for the existing paper based system. website: http://indiabudget.nic.in 10 Keeping in view the aforementioned factors, it is proposed to defer the commencement of dema....
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....onomic Zone under the Special Economic Zones Act, 2005, for ten consecutive assessment years. The provisions contained in section 80-IB provide for deduction of the profits and gains of derived by the assessee from certain industrial undertakings established before the specified dates and engaged in specified business, for specified number of assessment years. The provisions contained in section 80-IC allow 100% deduction for specified number of years of the profits and gains of undertaking or an enterprise established before the specified dates in the notified areas, or engaged in thrust area activities. It is proposed to amend section 10B and insert a new section 80 AC so as to provide that no deduction under section 10 B and section 80-IA, section 80-IAB, section 80-IB and section 80-IC shall be allowed to an assessee who does not furnish a return of his income on or before the due date specified in sub-section (1) of section 139. The proposed amendments will take effect from 1st April, 2006 and will, accordingly, apply in relation to the assessment year 2006-07 and subsequent years. [Clauses 5 and 15] Prescribing new class of persons for allotment of PAN and suo-....
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....any of those authorities. With a view to clarify the intention of the legislature it is proposed to insert an Explanation to sub-section (1) of the said section so as to provide that any income-tax authority, being an authority higher in rank, may exercise the powers and perform the functions of the income-tax authority lower in rank, if it is so directed by the Board under the said section. It has also been provided that any such direction issued shall be deemed to be a direction issued by the Board under the said sub-section (1). [Clause 30] This amendment will take effect retrospectively from 1st April, 1988. IMPROVING TAX PAYERS SERVICE New Scheme to facilitate submission of returns through Tax Return Preparers It is proposed to insert a new section 139B in the Act so as to provide that for the purpose of enabling any specified class or classes of persons to prepare and furnish returns of income, the Board may, by way of notification, frame a scheme providing that such persons may furnish their returns of income through a Tax Return Preparer authorised to act as such under the scheme. It is further proposed to provide that the Scheme framed under the said sect....
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....ffect from 1st April, 2007 and will, accordingly, apply in relation to the assessment year 2007- 2008 and subsequent years. [Clause 4] Extension of exemption from levy of dividend distribution tax to close-ended equity oriented funds and change in the definition of equity oriented funds Under the existing proviso to sub-section (2) of Section 115R, dividend distribution tax is not payable in respect of any income distributed to unit holders of open-ended equity oriented funds in respect of any distribution made from such funds. An open-ended equity oriented fund is defined in the Explanation to section 115T to mean such fund where the investible funds are invested by way of equity shares in domestic companies to the extent of more than fifty per cent of the total proceeds of such fund. The percentage of equity shareholding is computed with reference to the annual average of the monthly averages of the opening and closing figures. With a view to provide close-ended funds a level playing field, it is proposed to omit the word 'open-ended' from the proviso to sub-section (2) of section 115R and from the Explanation to section 115T so as to provide that all equity oriented fun....
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....1st June, 2006. Exemption on Aircraft lease rentals extended Clause (15A) of section 10 provides for exemption from income tax of the lease payment received in respect of a lease of an aircraft or an aircraft engine by the Government of a foreign state or a foreign enterprise from an Indian company engaged in the business of operation of aircraft. This exemption is available subject to the condition that the agreement for such lease is entered into prior to 1st April, 2006. In other words, the tax exemption is not available in respect of lease rent payments under an agreement into on or after 1st April, 2006. Further, clause (6BB) of section 10 also provides exemption from grossing of tax paid by the Indian company on lease payments under an agreement entered into after the 31st March, 2006. It is proposed to provide that the exemption for lease payments shall continue with regard to agreements entered into on or before 31st March, 2007. The benefit of exemption from grossing of tax will consequently be available in respect of lease payments made in pursuance of agreements entered into after 31st March, 2007 when the lease payments become taxable. These amendments will ....
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.... and it also refers to a mutual fund registered under Securities and Exchange Board of India Act, 1992 or regulations made there under, it is proposed to amend the provisions of clauses (xi), (xiii) and (xiv) of sub-section (2) so as to substitute the words "notified under clause (23D)" by the words "referred to in clause (23D)". This would align the provisions of these clauses with that of clause (23D) of section 10. This amendment is only for the purposes of aligning the provisions of section 80 C with that of clause (23D) of section 10. These amendments will take effect from 1st April, 2007 and will, accordingly, apply in relation to the assessment year 2007- 2008 and subsequent years. [Clause 16] Rationalisation of provisions relating to deduction of health insurance premium paid by the employer and exempt status of such payments in the hands of employees Any salary due or paid or allowed to an employee by the employer is chargeable to tax under the head 'salaries'. The term 'salary' has been defined in section 17 which, inter-alia, includes wages, pension, perquisites or profits in lieu of or in addition to salary. However, clause (iii) of the proviso to clause (2) of....
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....ployer or reimbursement of premium paid by the employees, in health insurance schemes of other insurers, approved by the Insurance Regulatory and Development Authority, shall also be exempt from the purview of perquisites. These amendments will take effect from 1st April, 2007 and will, accordingly, apply in relation to the assessment year 2007- 2008 and subsequent years. [Clauses 8 and 9] Rationalisation of provisions of section 80 CCC Section 80 CCC provides that an assessee, being an individual, shall be allowed a deduction (up to rupees ten thousand) from his total income of the amount paid or deposited by him to effect or keep in force a contract for any annuity plan of Life Insurance Corporation of India or any other insurer for receiving pension from the fund referred to in clause (23AAB) of section 10. Since the deduction available under section 80 C and section 80 CCC are capped by an overall limit of rupees one lakh, as laid down in section 80 CCE, and there are no sectoral caps in section 80 C, it is proposed to align the provisions of the two sections by amending the provisions of section 80 CCC so as to increase the limit of investment from rupees ten thous....
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....industrial park or special economic zone notified by the Central Government in accordance with the scheme framed and notified by it for the period beginning on 1st April, 1997 and ending on 31st March, 2006, is eligible for deduction under the said section. website: http://indiabudget.nic.in 14 To continue attracting investment to the industrial parks, it is proposed to amend clause (iii) of sub-section (4) of section 80 IA to extend the time limit from 31.3.2006 to 31.3.2009. This amendment will take effect from 1st April, 2007 and will, accordingly, apply in relation to the assessment year 2007-2008 and subsequent years. [Clause 18] Provisions relating to exemption of specified income of certain bodies or authorities It is proposed to insert a new clause in section 10 of the Act to provide exemption from income tax to any specified income of a non-profit body or authority notified by the Central Government which is established, constituted or appointed under a multi-lateral treaty, agreement, or convention, to which the Central Government is a signatory. The nature and extent of income to be exempted will also be notified by the Central Government. This am....
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....principal place of business in India; (ii) the fund shall be vested in two or more trustees or in the Official Trustee under an irrevocable trust; (iii) the contribution of an employee in any year shall be a definite proportion of his salary for that year and shall be deducted by the employer from the employee's salary; (iv) the contribution of an employer to the individual account of an employee in any year shall not exceed the amount of contributions of the employee in that year; etc. With a view to provide legislative synergy between the Income-tax Act and the Employees' Provident Fund & Miscellaneous Provisions Act, 1952 to tackle the problems being faced by the small investors in the recognised provident funds, it is proposed to insert a new clause (ea) in the said rule so as to provide that the fund shall be of an establishment to whom the provisions of sub- section (3) or sub-section (4) of section 1 of the Employees' Provident Funds and Miscellaneous Provisions Act, 1952 are applicable and such establishment has been exempted under section 17 of the said Act from the operation of all or any of the provisions of any scheme referred to in that section. Further,....
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....e provisions of the Income tax Act or the said agreement. For this purpose, the 'specified association' and 'specified territory' will be notified by the Central Government. A consequential amendment is also proposed to be made to the definition of 'rate or rates in force' or 'rates in force' under section 2(37A) so as to provide a reference to the proposed new section. [Clauses 3 and 20] These amendments will take effect from 1st June, 2006. Reference to the definition of 'derivatives' Under the existing provisions of clause (5) of section 43, an eligible transaction in respect of trading in derivatives carried out in a recognised stock exchange is not deemed to be a speculative transaction. The definition of derivatives was earlier referred to, in clause (aa) of section 2 of the Securities Contracts (Regulation) Act, 1956. Through an amendment made in January, 2005 to the Securities Contracts (Regulation) Act, 1956, the said clause (aa) has been re-lettered as clause (ac). Accordingly, the reference to the definition of the term 'derivative' has been re-lettered in clause (5) in section 43. This amendment will take effect retrospectively from 1st April, 2006. ....
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.... for the purpose of levy of fringe benefit tax. Clause (b) of sub-section (1) of section 115WC provides that the actual amount of contribution by the employer to an approved superannuation fund for employees shall be the value of fringe benefits. It is proposed to amend the said clause (b) so as to provide that contribution by an employer to an approved superannuation fund to the extent it does not exceed rupees one lakh per employee in respect of whom contribution is made, shall not be liable to fringe benefit tax. For example, consider an employer who has three employees: A, B and C and he makes contribution to their account in the approved superannuation fund in the following manner :- Employee Contribution to approved superannuation A Rs. 50,000 B Rs. 90,000 C Rs. 2,00,000 In the case of employees A and B, the value of fringe benefits shall be taken to be nil since contributions by the employer in respect of these employees does not exceed Rs. 1,00,000 in each case. However, in the case of employee C the value of fringe benefit shall be Rs. 1,00,000 (Rs. 2,00,000 - 1,00,000) for the purposes of levy of fringe benefit tax. website: http://indiabudget.nic.....
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....n the value of transactions of non-delivery based sale of an equity share in a company or a unit of an equity oriented fund, entered in a recognised stock exchange to be paid by the seller, (iv) @ 0.0133%, on the value of transactions of derivatives being option or future, entered in a recognised stock exchange, (v) @ 0.2% on the value of transactions of sale of units of an equity-oriented fund to the mutual fund. With a view to raise additional resources and also plug the leakage of tax revenue, it is proposed to enhance these rates. The proposed new rates shall be as under :- (i) @ 0.125% on the value of transactions of delivery based purchase of an equity share in a company or a unit of an equity oriented fund, entered in a recognised stock exchange, to be paid by the buyer, (ii) @ 0.125 % on the value of transactions of delivery based sale of an equity share in a company or a unit of an equity oriented fund, entered in a recognised stock exchange, to be paid by the seller, (iii) @ 0.025% on the value of transactions of non-delivery based sale of an equity share in a company or a unit of an equity oriented fund, entered in a recognised stock exchange to be paid....
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..../STPs or SEZs; 12) Ships for breaking up; 13) Non-mega power projects, transmission and distribution projects, and high voltage transmission equipments. B. PEAK RATE OF AD VALOREM CUSTOMS DUTY REDUCED: 1) Peak rate of customs duty on non-agricultural products has been reduced from 15% to 12.5% with a few exceptions. 2) Ad valorem component of customs duty on textiles fabrics and garments has been reduced from 15% to 12.5%. There is, however, no change in specific component of customs duty. C. METALS AND THEIR INPUTS: (I) Customs duty has been reduced from 10% to 7.5% on primary and semi-finished forms of following metals :- (a) Alloy steel, (b) Aluminium, (c) Copper, (d) Zinc, (e) Ashes and residues of copper and zinc, (f) Tin, (g) Base metals of Chapter 81 (such as, Tungsten, Magnesium, Cobalt, Titanium, etc.) (h) Calcined alumina 17 website: http://indiabudget.nic.in 18 (II) Customs duty has been reduced from 5% to 2% on mineral ores and concentrates. (III) Customs duty has been reduced from 10% to 7.5% on ferro alloys. (IV) Customs duty of 5% has been imposed on iron and steel melting scrap. (V) Concessional rate ....
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....s and spun yarns has been reduced from 15% to 10%; 2) Customs duty on DMT, PTA, MEG and Caprolactum has been reduced from 15% to 10%; 3) Customs duty on Paraxylene has been reduced from 5% to 2%; 4) Customs duty on specified textile machinery, and parts for manufacture of such machinery, has been reduced from 15% to 10%. I. INFORMATION TECHNOLOGY: 1) Customs duty on Set Top Boxes, whether or not covered under ITA (Information Technology Agreement), has been unified at Nil customs duty plus 16% CV duty plus 4% special additional duty of customs; 2) CVD under Section 3(3) of the Customs Tariff Act has been withdrawn on computers consequent to imposition of excise duty at 12% on computers. 3) Customs duty on MP3 Players and MPEG4 Players has been reduced from 15% to 5%. website: http://indiabudget.nic.in 19 J. PETROLEUM: 1) Customs duty on naphtha has been reduced from 10% to 5%; 2) Customs duty on Petroleum Coke has been reduced from 10% to 5%; 3) Customs duty on natural gas including propane and butanes, has been unified at 5%. K. HEALTH 1) Customs duty on 14 specified anti-cancer and 10 specified Anti-AIDS drugs, and bulk drugs for their....
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..../tourism industry in terms of licenses issued under 1997-2002 Exim Policy. 8) Plant, machinery, equipment imported for setting up of Currency Note/Bank Note Press at Salbony, Mysore, Nasik and Dewas. 9) Exemption from CVD on gold concentrate. This exemption will continue by way of excise duty exemption. 10) Specified goods for manufacture of capital goods for setting up of a unit with an investment of Rs 5 crore or more. website: http://indiabudget.nic.in 20 CENTRAL EXCISE Note: (a) SED means Special Excise Duty. (b) AED (GSI) means Additional Excise Duty (Goods of Special Importance) Act. Changes come into effect immediately unless otherwise specified. Major proposals about central excise duty are the following: A. RELIEF MEASURES: 1) Excise duty has been reduced from 24% to 16% on aerated waters. 2) Excise duty has been reduced from 24% to 16% on: (a) Petrol cars with length not exceeding 4 metres and engine capacity not exceeding 1200 cc; and (b) Diesel cars with length not exceeding 4 metres and engine capacity not exceeding 1500 cc. 3) Excise duty has been reduced from 16% to 8% on: (a) Heat resistant latex rubber thread (b) L....
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....s) supplied for manufacture of PD pumps for handling water. (g) Specified Goods meant for display in any fair or exhibition in India (h) Parts of table ware, kitchenware and other household articles of - iron and steel, copper, aluminium (i) Railway track machines (j) Sulphur (2503 00 10). Sulphur falling under this tariff item for fertilizers will be exempt. (k) Mixture of graphite and clay for manufacture of pencils or pencil leads. (l) Aluminium ferrules for manufacture of pencils. (m) Tobacco used for smoking through 'hookah' or 'chilam', commonly known as 'hookah' tobacco or 'gudaku' [Note: In all these cases, exemption upto Rs.1 crore would be available under the general Small Scale Industries (SSI) exemption scheme] (III) Excise duty has been raised from 8% to 16% on: (a) Mosaic tiles (b) Glassware (c) Lay flat tubing (d) Cigarette filter rods (IV) The rate of compounded levy on stainless steel patti/pattas has been increased from Rs. 15000/- per machine to Rs. 30000/- per machine. C. FOOD PROCESSING Excise duty has been reduced on: (a) Condensed milk from 16% to Nil. (b) Ice cream from 16% to Nil. (c) Pectic substance....
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.... Excise duty of 8% has been imposed on packaged software on electronic media. 3) Excise duty of 16% has been imposed on set top boxes not covered under the Information Technology Agreement. 4) Excise duty on storage devices, namely, DVD-Drives, Flash Drives and Combo Drives has been reduced from 16% to Nil. 5) Excise duty on MP3 Players and MPEG4 Players has been reduced from 16% to 8%. I. EXPORT ORIENTED UNITS: Duty on clearances of goods to Domestic Tariff Area from Export Oriented Units, Software Technology Parks, Electronic Hardware Technology Parks etc. has been changed from 50% of aggregate of customs duties to 25% of the basic customs duty plus excise duty payable on like goods. J. RETAIL SALE PRICE (RSP) BASED ASSESSMENT: 1) RSP based assessment is being extended from a date to be notified to: (a) Parts, components and assemblies for automobiles (b) Plant growth regulators (c) Tooth brushes 2) Abatement from RSP for levy of excise duty on aerated waters has been reduced from 45% to 42.5% consequent to reduction in excise duty from 24% to 16%. 3) Abatement from RSP for levy of excise duty on Compact Fluorescent Lamp has been reduced from 4....
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.... 18) Sugar L. WITHDRAWAL OF EXEMPTION FROM EXCISE DUTY ON UNBRANDED GOODS: Certain goods have been exempted from central excise duty if they are sold without a brand name. Since unbranded products are mainly made by smaller units, they will generally be eligible for the exemption under the general SSI exemption scheme. Larger units will pay excise duty but will be able to take input tax credit. Having regard to this, the exemption from excise duty has been withdrawn in the case of following unbranded goods: 1) Wadding, gauges. 2) Protein concentrates and textures protein substances. 3) Churan for paan. 4) Custard powder. 5) Food items of tariff line 2106 90 99. 6) Food flavouring matter. 7) Sugar syrups containing added flavouring or colouring matter (excluding preparations for lemonades or other beverages intended for use in aerated waters). 8) Mineral water. 9) Waters other than aerated and mineral waters, ice and snow, not containing sugar or other sweetening matter or flavour (2201 90 90). 10) Waters other than aerated and mineral waters, ice and snow containing sugar or other sweetening matter or flavour other than aerated waters or lemonad....
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....9 so as to provide that in respect of goods falling under heading 3920 and 3921, the process of metallizing shall amount to 'manufacture'. 6) A Note has been inserted in Chapter 72 so as to provide that in relation to the products of this Chapter, the process of drawing or redrawing a bar, rod, wire rod, round bar or any other similar article, into bright bar, shall amount to 'manufacture'. 7) Note 5 in Chapter 73 provides that the process of coating with cement or polyethylene or other plastic materials of pipes and tubes of heading 7304 and 7305 amounts to 'manufacture'. This provision is being extended to goods of heading 7306. 8) Capital goods imported under EPCG Scheme are assessed to duty on the basis of transaction value as per the Customs Valuation Law. However, in respect of certain licences, while fixing the export obligation, which is a multiple of CIF value of imports, instead of taking into account the actual Customs assessed value, the corresponding value of new capital goods was taken. Notification No.160/92-Customs dated 20.4.1992 is being amended retrospectively to provide that in respect of these licenses, the export obligation would be refixed based on a....
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....re that the provisions relating to relinquishment of title to imported goods is not available to the importer in case such goods are involved in any offence. 15) First Schedule to the Central Excise Tariff Act, 1985 is being amended so as to align it with the Customs Tariff Act, 1975 (CTA), in line with the amendments proposed in CTA with effect from 1.1.2007. O. AMENDMENTS IN OTHER ACTS: 1) The Indian Stamp Act, 1899 is being amended so as to: (a) delegate the powers for composition or consolidation of stamp duties in respect of the instruments specified in the Union List of the Seventh Schedule to the Constitution, to State Governments, with a view to simplify and streamline the existing procedure. Presently, the powers are being exercised by the Central Government. (b) place all the instruments on equal footing in the matter of validation of instruments not duly stamped, on payment of the due stamp duty along with penalty thereon. Presently, the benefit of such validation is not available in case of Bills of Exchange and Promissory Notes not duly stamped, which creates difficulties in enforcement of financial obligations between the debtors and creditors. 2) Th....
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....money through different modes by any person; (ii) services provided as banker to an issue; 3) Management consultancy service, to specifically include consultancy in different areas of management; website: http://indiabudget.nic.in 26 4) General insurance service, to include service provided to a policy holder or any person by an insurer, including a re-insurer; 5) Life Insurance service, to include service provided to a policy holder or any person by an insurer, including a re-insurer; 6) Insurance auxiliary service concerning general insurance business, to include service provided to a policy holder or any person or an insurer, including a re-insurer; 7) Insurance auxiliary service concerning life insurance business, to include service provided to a policy holder or any person or an insurer, including a re-insurer; 8) Maintenance or repair service, to be renamed as "management, maintenance or repair" service, and to include management of movable property; 9) Erection, commissioning or installation service, to include erection, commissioning or installation of structures, whether or not pre-fabricated; 10) Consulting engineer service, to include eng....
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....st March, 2006. (VI) AMENDMENTS IN ACT AND RULES: (1) Finance Act, 1994 is being amended to: - (a) substitute references to 'commercial concern', in relation to seventeen taxable services, with 'person', so as to expand the scope of the service provider in the said services; [This change will come into effect from a date to be notified after the enactment of the Finance Bill, 2006] (b) clarify that taxable service includes any service provided or to be provided by any unincorporated association or body of persons to its members (Explanation to section 65); [This change will come into effect from a date to be notified after the enactment of the Finance Bill, 2006] (c) omit the Explanation at the end of section 65(105) relating to levy of service tax on taxable services provided from outside India to a recipient in India. Separate provision is being inserted to levy service tax on service provided from outside India to a recipient in India; [This change will come into effect from a date to be notified after the enactment of the Finance Bill, 2006] website: http://indiabudget.nic.in 27 (d) increase the rate of service tax from 10 per cent. to 12 per cent. and t....