Given below are the reactions to *Union Budget 2009 [Direct Taxes] by Dr
Suresh Surana, a noted Chartered Accountant.*
Attached is his picture.
In case of any further clarifications, you may contact him directly
on*9821044669.
*
Request you to carry.
thanks & regards,
Varsha Talreja
Paradigm Shift PR
9821195211
022 22813797 / 98
================
*UNION BUDGET 2009 *
**
*VIEWS OF DR. SURESH SURANA*
*Chartered Accountant*
The Finance (No.2) Bill, 2009 introduced by the Hon. Finance Minister in
Parliament has made several far reaching changes but has failed to meet huge
expectations.
*Introduction of the Goods and Services Tax with effect from April 1, 2010*
The indirect taxes comprising of excise duty, service tax, central sales tax
and state level value added tax account for annual tax collection of about
Rs.460,000 crores. Yet, the multiplicity of regulations and compliances
without availability of seamless credit makes it extremely complex and
inefficient. Under these circumstances, the reiteration of government's
commitment to introduce GST from April 1, 2010 is a far reaching step. It
has also used the pragmatic approach of classifying GST into central GST and
state GST. Even if we accomplish introduction of central GST by April 1,
2010, it will change the landscape of indirect taxation in India.
*Direct Taxes Code*
The announcement regarding introduction of a Direct Taxes Code effective
from next financial year can bring a far reaching change. The draft Bill is
expected to be circulated within the next 45 days and the Bill is expected
to be introduced in the winter session of the Parliament.
*Lowering of Tax Rate for Non Corporate Assessees*
With the abolition of surcharge for non corporate assessees, the highest tax
rate for individuals would be 30.9% from 33.99%. Further, the basic
exemption limit has been increased from Rs. 1.50 lacs to Rs.1.60 lacs.
Similarly, partnership firms would also be taxed @ 30.9% as against the
earlier rate of 33.99%. This will provide major relief to non corporate
taxpayers.
*Abolition of Fringe Benefits Tax (FBT) and Commodities Transaction Tax
(CTT)*
* *
The abolition of FBT and CTT is a major step and would reduce the enormous
burden of compliance. With the abolition of FBT, the provisions regarding
taxation of perquisites have been re-introduced.
*Liberal tax Treatment of Limited Liability Partnerships*
The Limited Liability Partnership Act, 2008 has come into effect in 2009. As
per estimates, there are over 13 million micro, small and medium enterprises
in India. With the changes proposed by the Budget, 2009, LLPs are slated to
become a perfect solution for the limitations faced by the Small and medium
enterprises currently viz. unlimited liability and lack of flexibility in
case of partnership firms and compliance with complex and voluminous
regulations under Company Law in case of the companies. Earlier, one of
the key deterrents in this respect was lack of clarity regarding tax
treatment of LLPs viz whether LLPs would be taxed a partnership firms or as
companies.
In Budget, 2009, it is proposed to incorporate the taxation scheme of Limited
Liability Partnership firm ('LLP') in the Income Tax Act on the same lines
as the taxation scheme currently prevalent for general partnerships, i.e.
taxation in the hands of the entity and exemption from tax in the hands of
its partners. This means that there would not be any levy of dividend
distribution tax (currently 16.995% for companies) in respect of
distributions made by LLPs to their partners.
It is proposed to provide that in case of liquidation of an LLP, every
partner will be jointly and severally liable for payment of tax unless he
proves that non-recovery cannot be attributed to any gross neglect,
misfeasance or breach of duty on his part.
*Extension of Tax Holiday for STPs/EOUs*
The export industry was looking forward to extension of the tax benefits
available to Software Technology Parks (STPs) and Export Oriented Units
(EOUs) beyond the sunset financial year 2009-10 at least for 3-5 years.
However, the benefit has been extended by 1 more financial year viz
financial year 2010-11.
Further, all the exports from India were eligible for tax deduction under
the now defunct sections 80 HHC/ HHD & HHE nearly for 2 decades from 1985 to
2005. These benefits were initially 100% and were phased out from 1999-2000
to 2004-05. Considering the current exceptional scenario, similar benefits
were expected at least partially (say 50%) for next 2 years for all the
profits derived from exports. However, expectations in this respect have
been belied.
*Increase in Minimum Alternate Tax (MAT)*
* *
The increase in MAT rate from 10% to 15% is a huge blow to companies in fast
growth and capital intensive sectors. It also partially negates the benefit
of extension of tax holiday for STPs and EOUs as such units are liable to
MAT. However, the period for credit of MAT has been extended from 7 years to
10 years.
* *
*Weighted Deduction for Research and Development Extended to All
Manufacturing Units*
* *
The "Weighted deduction in respect of research and development" at 150
percent of the expenditure incurred (except on land and building) has been
extended to companies engaged in the business of manufacture or production
of an article or thing except certain specified items.
*Gifts in Kind included in Income*
Section 56 which hitherto treated certain receipts of sums of money from
persons other than specified relatives has been extended to gifts in kind.
* *
*Increase in Wealth-tax Exemption Limit*
The increase in wealth tax exemption limit from Rs. 15 lacs to Rs.30 lacs is
a very welcome step. However, given the fact that wealth tax collection is
nominal and covers barely 5% of the assessees, the rationale for its
continuation needs to be revisited.
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