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Ask, and you shall receive…said the FM

Direct Taxes

The finance minister has scored impressively in the Direct taxes measures proposed in Union Budget 2001-02.

Reliefs given

Surcharge for all categories of assesses removed other than the 2 per cent Gujarat earthquake surcharge.

Thus, the effective rate of income tax for assesses having income over Rs 60,000 and up to 150,000 would be down to 20.4 per cent from the existing 22.4 per cent.

For those having income above Rs 150,000, the effective rate of income tax would come down to 30.6 per cent from the current rate of 35.1 per cent.

For corporates the effective rate of tax would come down from the current level of 39.55 per cent to 35.70 per cent.

Dividend distributed by companies which was earlier subject to a effective dividend tax of 22.6 per cent would now be reduced to 10.2 per cent.

Tax holidays for telecom and infrastructure projects.

Tea development allowance increased to 40 per cent from the existing 20 per cent.

Profits derived by the units located in the software technology parks from the export of "on-site" services will be eligible for deduction like their other export income. Units located outside these zones will also get the benefit of tax exemption on such export earnings.

The condition relating to transfer of ownership of companies in sections 10A and 10B of the Income Tax Act will not apply in respect of companies in which public is substantially interested.

Accelerated depreciation on ships increased to 25 per cent from 20 per cent and on commercial vehicles to 50 per cent from 40 per cent.

Weighted R& D deduction of 150 per cent for research relating to biotechnology as well for clinical trials, filing patents and obtaining regulatory approvals.

Investments in primary market issues to qualify as eligible investments for capital gains tax exemption i.e investment in these issues would be equivalent to investing in capital gains exemption bonds.

However, this exemption would apply only to capital gains arising out of sale of securities and units.

Tax on casual income/game shows reduced to 30 per cent from the current level of 40 per cent and such tax has to be deducted at source.

Tax rebate on investments under Sec 88 increased to 30 per cent from the present 20 per cent for assesses having income up to Rs 100,000.

Tax rebate in respect of interest payable on housing loan increased to Rs 150,000 from the existing Rs100,000 in respect of self-occupied property.

Measures taken to augment tax revenues:

Interest payments on External Commercial Borrowings shall be subject to deduction of tax at source w.e.f from 01/06/01.

Separate provisions for "Transfer Pricing" to be introduced in order to discourage multinationals adopting discriminatory inter company pricing.

Profits from eligible domestic sales (up to 25 per cent of total sales) of units registered in EPZ, FTZ and STP which were exempt under Sec 10A and Sec 10B to be taxed henceforth.

Foreign telecasting channels will henceforth be taxed in India, on their income computed in accordance with the provisions of the Income-tax Act.

Perquisites other than car and housing, to salaried employees to be valued at cost to the company.

Exemption under Sec 80L for interest lowered to Rs 9,000 from the existing Rs 15,000.

Interest on refund of taxes to assessees reduced to 0.75 per cent from the existing 1.0 per cent per month.

Limit for deduction of tax at source in respect of interest earned on bank deposits reduced from Rs 10,000 to Rs 2,500.

Payments of brokerage /commissions etc., to attract 10 per cent tax deduction at source. This would not be applicable to transactions relating to sale of securities.

One by six criteria for compulsory filing of returns to be extended to all urban areas as defined by the 1991 census.

Measures to simplify procedures:

Assessees would no longer be required to obtain income tax clearance certificate under Sec 230A for transfer of immovable properties.

Time limit for completion of assessment under Sec 143 reduced to one year from the existing two years from the end of the relevant assessment year and time limit under Sec154 reduced to six months from the present four years.

Time limit for filing tax audit report and return under Sec 44AB & Sec 139(1) for all assessees reduced by one month. For corporates, the due date would be 31st October and for other assesses it would be 31st July.

Fixed penalty regime has been introduced thereby reducing the discretionary powers of the assessing officers in determining the quantum of penalty.

Rediff-Dun & Bradstreet Budget Impact Analysis
Budget 2001

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