Union Budget 2010

Key Highlights of

Direct and Indirect

Tax Proposals
 Index
Page
g
S No.
S. No Taxes/ Duties Particulars
Numbers

Changes in Exemptions & Deductions

g in Tax Rates
Changes
1 Income Tax 3-6
Changes in TDS Threshold limits
Other Amendments

2 Custom Duty Change in Duty Rates 7-9

Central Excise
3 Change in Duty Rates 10 - 13
Duty

New Services brought to Tax Net

4 Service Tax 14 - 17
Amendment in Definitions/ Coverage

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 1. Income Tax

• Additional Deduction in respect of investment in Infrastructure Bonds as notified

up to Rs.20,000/- is allowed U/s 80CCF.

• Contributions to Central Government Health Schemes also allowed as a

deduction under section 80D.

• Weighted deduction of 200% on expenditure incurred on in-house R&D allowed in

place of earlier 150%.

Changes • Weighted deduction of increased to 175% from earlier 125% allowed in respect of
in contributions to National Laboratories, research associations, colleges,
Exemptions universities and other institutions for scientific research.
and
Deductions • Weighted deduction of 125 per cent allowed to payments made to an approved
association engaged in research in social sciences or statistical research. Further
the income of such approved research association shall be exempt from tax.

• Benefit of investment linked deduction under the Act extended to new hotels of
t
two-star
t category
t and
d above
b anywhere
h i India
in I di to
t boost
b t investment
i t t in
i the
th tourism
t i
sector.

• Allow pending projects to be completed within a period of five years instead of

four years for claiming a deduction of their profits, as a one time interim relief to
th housing
the h i and d reall estate
t t sector.
t

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 Income Tax Continued…

• Minimum Alternate Tax (MAT) to be increased to 18 per cent of book profits

from 15 per cent.
Change in Tax
Rates • No changes made in the Corporate Tax rates. However surcharge applicable to
Domestic companies reduced to 7.5% from 10%.

Particulars Existing Proposed

Income up to Rs.1.6 lakh NIL NIL

Income above Rs.1.6 10% 10%

Changes in lakh and up to Rs.3
Rs 3 lakh
Income Tax
Slabs for Income above Rs.3 lakh 20% 10%
Individual/ and up to Rs.5 lakh
HUFs
Income above Rs.5 lakh 30% 20%
and up to Rs.8 lakh

Income above Rs.8

Rs 8 lakh 30% 30%

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 Income Tax Continued…

P ti l
Particulars E i ti
Existing Li it
Limit Revised
R i d Limit
Li it (proposed
( d
from 01.07.2010)

194C - Contractor Payment

- Single Transaction 20 000

20,000 30 000
30,000
-Aggregate in whole year
Changes in 50,000 75,000
Minimum 194H - Commission Brokerage 2,500 5,000
Threshold 194I - Rentals 1 20 000
1,20,000 1 80 000
1,80,000
Limits for TDS
194B - Lottery Winnings 5,000 10,000
194BB - Horse Race Winning 2,500 5,000
194J - Professional/Technical 20,000
, 30,000
,
Services
194D - Insurance Commission 5,000 20,000

• Disallowance U/s 40(a)(ia) would not be attracted if tax is paid before

the due date of filing the return.
Other Changes
in TDS
Provisions • Interest on delayed deposition of TDS u/s 201(1A) increased from 12
per cent to 18 per cent per annum with effect from 1st July, 2010.

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 Income Tax Continued…

• Turnover Limit for tax audit enhanced to Rs. 60 lakh for businesses and to Rs. 15
lakh for professions.

• Amendment made in explanation to section 9(2) stating that income would be

deemed to accrue or arise in India even if the Non-resident has a place of business
in India or not and has rendered services in India or not.

• Scope of presumptive taxation to be extended to all small businesses with a

turnover up to Rs.
Rs 60 lakh.
lakh

• Receipts from business activities up to Rs.10 lakh in the year would not impact the
charitable status of an Institution
Other
Amendments • To facilitate the conversion of small companies into Limited Liability Partnerships,
Partnerships
transfer of assets as a result of such conversion not to be subject to capital gains
tax.

• Amount of maximum penalty leviable under section 271B for non-adherence to the
provisions
i i off section
ti 44AB regarding
di tax
t audit
dit increased
i d from
f 1 Lakh
L kh to
t 1.5
1 5 Lakh.
L kh

• Power to condone delays in admitting appeals U/s 260A provided to High Courts
with effect from1st October, 1998.

• P
Power given
i t DIT(E) to
to t withdraw
ithd registration
i t ti given
i U/ 12A off Act.
U/s A t

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 2. Custom Duty

• On crude petroleum increased from Nil to 5%.

Petroleum • On Motor Spirit (petrol) and HSD (diesel) increased from 2.5% to 7.5%.

• On some other specified petroleum products increased from 5% to 10%.

• On serially numbered gold bars (other than tola bars) and gold coins
increased from Rs.200 per 10 gram to Rs.300 per 10 gram.

• On other forms of gold increased from Rs.500 per 10 gram to Rs.750

Precious per 10 gram.
Metals
• On silver increased from Rs.1000
Rs 1000 per kg to Rs.1500
Rs 1500 per kg.
kg

• On platinum increased from Rs.200 per 10 gram to Rs.300 per 10

gram.

Environment Full exemption from basic customs duty and special additional duty of
Friendly customs is being extended to specified parts relating to environment –
Items friendly items

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 Custom Duty Continued…

• Project imports status is being granted to the initial setting up or substantial

expansion of, a cold storage, cold room (including farm pre-coolers) for
preservation or storage or an industrial unit for processing of agricultural,
apiary, horticultural, dairy, poultry, aquatic & marine produce and meat.
These projects would attract concessional rate of basic customs duty of
5%.

Food/ Agro • Project imports status is being granted to installation of Mechanized

Processing Handling Systems & Pallet Racking Systems, in mandis or warehouses for
food grains and sugar,
sugar with concessional rate of basic customs duty of 5%.
5%
Such systems are also being exempted from additional duty of customs
(CVD) and special additional duty of customs.

• Truck Refrigeration units for the manufacture of refrigerated vans / trucks is

being fully
f exempted from
f basic customs duty. Such
S units are already
exempt from excise duty.

• On long pepper reduced from 70% to 30%

30%.

• On ‘asafoetida’ (heeng) reduced from 30% to 20%.

Agriculture/
Horticulture • Full exemption from basic customs duty is being provided to bio-polymer/bio-
plastics (HS Code 39139090) used for manufacture of bio-degradable agro
mulching films, nursery plantation & flower pots.

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 Custom Duty Continued…

• On Rhodium reduced from 10% to 2%.

• The current limit of Rs. 1 lakh per annum for duty free import of samples
Export is being enhanced to Rs. 3 lakh per annum
Promotion
• At present specified components, raw materials and accessories for the
manufacture of sports goods are exempt from basic customs duty.
Some additional items are being added to the list of exemption.

Additional Goods imported in pre-packaged form and intended for retail sale and
Duty of certain specified goods namely, ready-made garments, mobile phones and
C t
Customs off watches
t h are being
b i provided
id d an outright
t i ht exemption
ti f
from additional
dditi l duty
d t off
4% customs of 4%. In addition, outright exemption from this duty is also being
(Special provided to Carbon Black Feedstock, waste paper and paper scrap. The
CVD) existing exemption by way of refund would continue on other items.

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 3. Central Excise Duty
General
CENVAT The standard rate of excise duty of 8% on non-petroleum products is being
Rate for non- increased to 10% with a few exceptions where exemptions/concessions
petroleum have been given.
goods

Consequent to enhancement of the standard rate of duty from 8% to 10%,

Cement the specific rates of duty on cement and cement clinker have also been also
being revised upwards.

Ad-valorem component of excise duty on large cars, Multi Utility Vehicles

Automobile and Sports Utility Vehicles etc. and chassis thereof is being increased from
Sector 20% to 22%. There is no change in the specific component, which will
continue to be levied as applicable.

The existing slab of filter cigarettes of length not exceeding 70 mm is being

broken up into two slabs: filter cigarettes of length not exceeding 60 mm;
Tobacco
and filter cigarettes of length exceeding 60 mm but not exceeding 70 mm.
Products
The rates of every slab except for the cigarettes not exceeding 60 mm have
been substantially increased.

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 Central Excise Duty Continued….

Clean Energy Cess is being imposed on coal, lignite and peat produced in
Clean Energy
India. This cess would be levied and collected as a duty of excise with effect
Cess
from a date to be notified after the enactment of the Finance Bill, 2010.

A uniform concessional rate of duty of 4% is being prescribed for parts,

namely batteries including battery chargers, electric motors and AC or DC
motor controllers required for manufacture of all categories of electrical
Environment vehicles including cars, two wheelers and three wheelers (like
Friendly and ‘Soleckshaw’) subject to actual user condition. This concession will be
Energy available till 31.03.2013. Such vehicles will also be charged to excise duty
Saving @ 4%.
Goods
Excise duty is being reduced from 8% to 4% on LED lights/lighting
fixtures.

Full exemption from excise duty is being provided to additional specified

raw materials for the manufacture of rotor blades for wind operated
electricity generators.

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 Central Excise Duty Continued…

Relevant Changes are being made to provide certain facilities to Small Scale
Industrial (SSI) units eligible for availing benefit under Notification No. 8/2003-
CE as under:

a) full Cenvat credit on capital goods in one installment in the year of

receipt of such goods.
b) facility of payment of excise duty on quarterly basis.
MSME/
Small
The above
Th b changes
h come into
i t effect
ff t from
f 1 t April,
1st A il 2010 and d will
ill be
b
Scale
applicable even if an eligible unit opts not to avail of the SSI exemption.
Sector
While retaining the system of filing quarterly returns, the due date for filing of
Central Excise returns by SSI units is being advanced to the 10th of the month
following the quarter.

The relaxation from brand name restriction under the general SSI exemption
scheme is being g extended to p
plastic bottles and p
plastic containers used as
packing material.

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 Central Excise Duty Continued…

1) Full exemption from excise duty on following items is being

withdrawn. They will now attract excise duty of 4%.

a) Mosquito nets impregnated with insecticides;

b) A gas;
Av
c) Microprocessor for computers (other than
motherboard), Floppy disk drive, Hard disk drive, flash
drive, CD/DVD and Combo Drive meant for external
Withdrawal use
use.
of
Exemptions/ 2) Full exemption from excise duty on baby & clinical diapers and
Concessions sanitary napkins is being withdrawn. These items will now
attract duty at 10%.

3) Concessional rate of excise duty on open tin sanitary (OTS) cans

is being withdrawn. OTS cans will now attract duty at 10%.

4) Concessional rate of excise duty on goggles is being withdrawn

except those used for correcting vision. These items will now
attract duty at 10%.

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 4. Service Tax

1) Service of permitting commercial use or exploitation of any event organized

by a person or organization.

2) Copyrights on cinematographic films and sound recording are being brought

under
d the
th ambit
bit off service
i tax
t

3) Service tax on the following health services:

(a) health check up undertaken by hospitals or medical establishments for the
New employees of business entities; and
Services (b) health services provided under health insurance schemes offered by insurance
companies.
Added in
Tax Net 4) Service provided for maintenance of medical records of employees of a
business entity.

5) Service provided by Electricity Exchanges.

6) Certain additional services provided by a builder to the prospective buyers such

as providing preferential location or external or internal development of
complexes on extra charges. However, service of providing vehicle-parking
space would not be subjected to tax.

7) Service of promoting of a ‘brand’ of goods, services, events, business entity

8) The promotion, marketing or organizing of games of chance, including lottery, is

being introduced as a separate service.

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 Service Tax Continued…

1) The scope of air passenger transport service is being expanded to

include domestic journeys, and international journeys in any class.

2) At present, in the case of Information Technology Software

Service the levy of tax is limited only to cases where IT
software is used for furtherance of business or commerce. The
scope of the taxable service is being expanded to cover all
cases irrespective of its use.

3) IIn the
th case off ‘Commercial
‘C i l training
t i i or coaching’
hi ’ service,
i an
Amendment Explanation is being added to clarify that the term ‘commercial’ in
in the context of this service would mean any training or coaching,
Definitions/ which is provided for a consideration, whether or not for profit.
Coverage This change
g is being gggiven retrospective
p effect from 01.07.2003.

4) In the definition of ‘Sponsorship Service’, the exclusion relating to

sponsorship pertaining to sports is being removed.

5) In the ‘Construction
Construction of complex service
service’, it is being provided that
unless the entire consideration for the property is paid after the
completion of construction (i.e. after receipt of completion
certificate from the competent authority), the activity of
construction would be deemed to be a taxable service provided
by the builder/promoter/developer to the prospective buyer and
the service tax would be charged accordingly.

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 Service Tax Continued…

6) Amendments are being made in the definition of the ‘Renting

of immovable property service’ to,-
(i) provide explicitly that the activity of ‘renting’ itself is a taxable
service.
se ce The e cchange
a ge has as bee
been g given
e retrospective
et ospect e e effect
ect
from 01.06.2007; and
(ii) levy service tax on rent of vacant land where there is an
agreement or contract between the lessor and lessee for
undertaking construction of buildings or structures on such
land for furtherance of business or commerce during the
Amendment tenure of the lease.
in
Definitions/ 7) Definitions of ‘Airport Services, ‘Port services’ and ‘Other
C
Coverage port services’ are being amended to provide that,-
that
(a) all services provided entirely within the airport/port premises
would be classified under these services; and
(b) an authorization from the airport/port authority would not be
a pre
pre-condition
condition for taxing these services.
services 21

8) An explanation is being added in ‘Auctioneer’s service’ to

clarify that the phrase ‘auction by government’ means an
auction involving
g sale of g
government p
property
p y and not when
the government acts as an auctioneer for sale of the private
property.

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 Service Tax Continued…

9) Definition of ‘Management of Investment under ULIP Service’ is

being amended to provide that the value of the taxable service
for any year of the operation of policy shall be the actual amount
charged by the insurer for management of funds under ULIP or
Amendment the maximum amount of fund management charges fixed by the
in Insurance Regulatory and Development Authority (IRDA),
Definitions/ whichever is higher.
Coverage
The above changes will come into effect from a date to be notified, after
the enactment of Finance Bill, 2010.

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 For any discussions on the provisions of Finance Bill 2010, you may please contact Mr. Dinesh
Singhal on dinesh.singhal@snr.net.in or contact us at our following offices:

Head Office:

A-15, Second Floor, Hauz Khas, New Delhi – 110 016 (India)
Tel. 91 11 26856421, 41655801, 26855884, Fax: 91 11 26567540
Email ID : snr@snr.net.in, website : www.snr.net.in

Mumbai Branch Office:

65 1st Floor,
F-65,
F Fl P fit Centre,
Profit C t Mahavir
M h i Nagar,
N K di li (West),
Kandivali (W t)
Mumbai – 400 067 Tel. 91 22 40109287
Email ID : snr.mumbai@snr.net.in

Bangalore Branch Office:

G.N. Residency, 7, Church Street,

Murugeshpalya, Bangalore – 560 017
Email ID : snr.bangalore@snr.net.in
g @

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