Budget 2008 Some welcome proposals under Income Tax

Budget 2008 Some welcome proposals under Income Tax

1. Last date for furnishing returns of income is proponed by one month: suitable amendments are made U/s 139(1) and 115WB of the Act for filling of the Income Tax and fringe Benefit Returns of Income of corporate and non-corporate assessees where audit report is mandatory to be obtained U/s 44AB of Income tax Act. Now, these assessees are required to file income tax return by or before 30^th Sep. every year for the assessment years 2008-09 and onwards.

It is a welcome proposal for chartered accountants as due to CA examination, scheduled in the month of Nov every year, most of the audit staff remains on leave in the month of Oct. every year. It will also give rise to early collection of major share of taxes paid by most of the assessees just before the filling of the return. After all 6 months are enough time to finalise the affairs of an accounting year for any type of unorganized assesses as organized and professionally managed companies are on the mode of monthly preparation of accounts.

2. Banking Cash Transaction Tax : It will not be at source cut now for withdrawal of cash from banks over and above Rs. 50,000/- in case of individual and HUF and Rs. 1,00,000/- in other cases with effect from 1^st of April 2009. The ambiguity still alive that the effective date is assessment year or financial year.

3. Fringe Benefit Tax : The anomaly of stock option is over from the assessment year 2008-09 it self by defining the term “Specified Security”. It has put a full stop on all the confusions with regards to Fringe Benefit Tax on stock option. The definition of specified security now includes employees stock option with effect from the Assessment year 2008-09 however the value of the specified security is still the grey area.

4. Star Hotels construction in Heritage sites : Under Section 80-ID provisions are made to provide five years tax holiday to 2-4 star hotels constructed and started operations within span of 1^st April 2008 to 31^st March 2013. It includes the places like Agra, Jalgaon, Aurangabad, Kancheepuram, Puri, Bharatpur, Chhatarpur, Thanjavur, Bellary, South 24 Parganas (excluding areas falling within the Kolkata Urban Agglomeration on the basis of the 2001 census), Chamoli, Raisen, Gaya, Bhopal, Panchmahal, Kamrup, Goalpara, Nagaon, North Goa, South Goa, Darjeeling and Nilgiri. It will give rise to tourism industry at such places.

5. 100 bedded (or more) Hospitals : it is proposed by Section 80-IB to give five year tax holiday to a hospital constructed between April 2008 to 31^st March 2013 and located in an area apart from the excluded urban agglomeration. The provision is aimed to promote health facility in the rural area of the country. By the provision the big players will start making their presence in the affected area of the country requiring badly health facility up-gradation. Simultaneously, the migration pressure on the urban area will be directly or indirectly, released.

6. Nursery as your agricultural income: start your little nursery now to grow plants and seeds for agriculture and whatever you earn will not be taxed. By way of inserting “saplings or seedlings grown in a nursery” under the definition of agricultural income u/s 2(1A) of the Act, it will be tax free in the hands of the assessee qualifying for exemption under section 10(1) of the Act.

7. Charitable Purpose: The curtain of charitable purpose is now no more available for operating commercial activities. The amendment to the section 2(15) has now specifically excludes the following activity whether or not running as charitable purpose:

a. any activity of trade, commerce or business.

b. Activity of rendering services.

These provisions will take effect from assessment year 2009-10.

8. Medical Insurance Premium : Take extra care of your parents and seniors citizens to claim Rs. 15,000/- premium paid for their health insurance premium as a deduction from taxable income. Under the existing provisions, one can claim deduction up to Rs. 15,000/- U/s 80-D for self or dependents heath insurance premium. By amending the provisions, an additional cap of Rs. 15,000/- is now available for securing health of parents or senior members of family in case of HUF. The compartments will not be interchangeable.

9. Save more U/s 80-C : The FM should know that this section is already over crowded in all the tax returns and need no scope for another accommodation under the cap of Rs. 1,00,000/-. But the FM has made two more options: (1) Senior Citizens saving scheme under Rule 2004 and (2) five year time deposit with Post Office. The attraction is that, the interest earned on all these will also be tax free.

10. After all the slabs of tax rates which has become talk of all the towns of the country today. The impact may be read in the following table:

Total Taxable Income (Rs.)	Tax - General Rate		Women		Senior Citizens
Total Taxable Income (Rs.)	Tax as per old rate	as per proposed rate	Tax as per old rate	as per proposed rate	Tax as per old rate	as per proposed rate
1,50,000.00	4,000.00	-	500.00	-	-	-
2,00,000.00	14,000.00	5,000.00	10,500.00	2,000.00	1,000.00	-
2,50,000.00	24,000.00	10,000.00	20,500.00	7,000.00	11,000.00	2,500.00
3,00,000.00	39,000.00	15,000.00	35,500.00	12,000.00	26,000.00	7,500.00
4,00,000.00	69,000.00	35,000.00	65,500.00	32,000.00	56,000.00	27,500.00
5,00,000.00	99,000.00	55,000.00	95,500.00	52,000.00	86,000.00	47,500.00
6,00,000.00	1,29,000.00	85,000.00	1,25,500.00	82,000.00	1,16,000.00	77,500.00
7,00,000.00	1,59,000.00	1,15,000.00	1,55,500.00	1,12,000.00	1,46,000.00	1,07,500.00
8,00,000.00	1,89,000.00	1,45,000.00	1,85,500.00	1,42,000.00	1,76,000.00	1,37,500.00
9,00,000.00	2,19,000.00	1,75,000.00	2,15,500.00	1,72,000.00	2,06,000.00	1,67,500.00
10,00,000.00	2,49,000.00	2,05,000.00	2,45,500.00	2,02,000.00	2,36,000.00	1,97,500.00