(BAD)GET for 2007-08

While I have not still looked into the fine prints of the budget, this budget seems to be more politically driven than anything else. Possibly the loss of elections in two northeastern states would have weighed heavily on the congress while announcing the budget. Anyway, getting on to the budget – if you recollect reading my earlier blog my view the government needs to closely monitor the commodity markets to keep a watch on unncessary speculation seems to have been bang on.

Before we go into the direct taxes lets have a look on the feel good factors for the economy as a whole:
Growth rate acheived – 9.6% (well on course for the targeted 10%)
Manufacturing sector grows by 11.3%
Service sector gorws by 11.2%
Per capita income increase by by 7.4%
Savings rate estimated at 32.4%
Investment rate estimated at 33.4%
Total Forex reserve stands at USD 180 bn
Avg inflation 5.4%
Merchandise exports exceed USD 100bn
Service exports exceed USD 125 bn
Government to aquire RBI’s stake in SBI (has set aside 40000 cr for this purpose)
CST rates reduced from 4 to 3%
Lot of thrust given on Primary and secondary Education (a seperate cess called Higher Education Cess introduced)

Now lets look at some of the Direct Tax proposals:
Weighted deduction for approved inhouse research extended for another 5 years
Section 40A – earlier if any payment in excess of Rs.20000 was made by cash only 20% of the expenditure was disallowed. From now on the entire expenditure will be disallowed.

ESOPS will now be taxable as a fringe benefit. As a result of this the value of ESOP which will be taxed as Fringe benefit will be considered as cost of aquisition in computing capital gains arising on sale of such shares.

The term capital asset for the purpose of capital gains now includes jewellery and work of art (earlier these were excluded from the definition of capital assets)

Cap on investment under section 54EC – a maximum cap of Rs.50 lacs has been put on investment in specified bonds (NHAI and Rural electrification bonds)

Section 80CCD to apply to non government employee also

Section 80E – now available for higher education of the assessee’s relative also (earlier it was only for self higher education) – relative means only spouse and children.

Section 80D- limit has been raised from Rs.10000 and Rs.15000 (senior citizens) to Rs.15000 and Rs 20000 respectively.

Section 80IA now available for companies engaged in laying and operating a cross country natural gas distribution network.

Section 10 incomes to be included while computing Minimum alternate Tax.

Section 115 O – Dividend distribution tax increased from 12.5% to 15%

Section 115R – Dividend Distribution tax for Money market Mutual funds 25%

I have not dealt with the changes in procedures and TDS in this blog.

Hope you find this helpful

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