UNION BUDGET – 2008 PRESENTED ON 29-02-2008 HIGHLIGHTS

A DIRECT TAX PROPOSALS:

1. PERSONAL TAXATION :

(a)

Basic tax rates unchanged.

(b) Tax slabs changed.
i)

For general assesses: Maximum Exemption Limit increased from Rs. 1,10,000 to Rs. 1,50,000/-. For Income of Rs. 1,50,000/- to Rs. 3,00,000/-, tax rate will be 10%. For income of Rs. 3,00,000/- to Rs. 5,00,000/-, tax rate will be 20%. For income above Rs. 5,00,000/-, tax rate will be 30%.

ii)

For women assesses: Maximum Exemption Limit increased from Rs. 1,45,000 to Rs. 1,80,000/-. For Income of Rs. 1,80,000/- to Rs. 3,00,000/-, tax rate will be 10%. For income of Rs. 3,00,000/- to Rs. 5,00,000/-, tax rate will be 20%. For income above Rs. 5,00,000/-, tax rate will be 30%.

iii)

For senior citizens: Maximum Exemption Limit increased from Rs. 1,95,000 to Rs. 2,25,000/-. For Income of Rs. 2,25,000/- to Rs. 3,00,000/-, tax rate will be 10%. For income of Rs. 3,00,000/- to Rs. 5,00,000/-, tax rate will be 20%. For income above Rs. 5,00,000/-, tax rate will be 30%.

(c)

Deduction U/s 80D for additional medical insurance premium of Rs. 15,000/- paid for parent or parents.

(d) (e) (f)

Deduction U/s 80C to include Senior Citizen Savings Scheme. No change in the deduction available U/s 80C (kept at Rs. 1,00,000/- only). Short Term Capital gains tax increased from 10% to 15%.
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(g) LTCG exemption in security market continued.
(h)

PAN to remain as sole identity for stock market participation.

(i) Reverse mortgage not to be considered as transfer. No taxable income to accrue to Senior Citizen.

2. CORPORATE TAXATION:
(a) (b) (c) (d) (e) (f) (g) (h)

Basic tax rates unchanged. Surcharge unchanged. Education cess unchanged. No change of tax rates for foreign companies. MAT to stay. MAT rate unchanged. Dividend Distribution Tax rates unchanged. Dividend Distribution Tax relief to parent company as it can offset dividend issued to it by subsidiary company against the dividend declared by parent provided that Dividend Distribution Tax has been paid and parent is not a subsidiary of another company.

(i)

Tax breaks U/s 80IB by introducing subsection 11C for hospitals in tier II and tier III area for a period of five years beginning from 1st April 2008 to 31st March 2013.

(j)

Tax breaks for 5 years for hotels of 2nd, 3rd and 4 star categories for UNESCO declared heritage sites.

(k) 125% weighted average deduction for research activities.
(l) (m)

Amortization of preliminary expenses U/s 35D modified to include services sector. No TDS on corporate debt instruments issued in demat format and listed on recognized stock exchange.

(n) Fringe Benefit Tax (FBT) modified.
(o) (p)

FBT on ESOP to stay. FBT exemption on crèche, sports encouragement activities and guest house removed.
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(q)

BCTT withdrawn.

(r) STT modified. To be applicable for options only and that too on option premium not on option value. (s) STT to be allowed as deductible expense. (t) Commodity Transaction Tax (CTT) introduced in the line of STT.

B INDIRECT TAXATION / OTHER ISSUES:

(a)
(b) (c)

CST cut from 3% to 2%. Service Tax rate unchanged. Basic exemption limit under service tax increased to Rs. 10 Lacs from Rs. 8 Lacs. New services added. Services of asset management under ULIP, stock exchanges, commodity exchanges and clearing houses covered.

(d)
(e)

(f)

Several services of money changers and tour operators covered. Right to use goods when VAT is not payable covered under service tax. Customized software covered under service tax. Service Tax Dispute Resolution Scheme 2008 introduced. Scope of already taxable services also enhanced. Excise duty on packaged software up from 8% to 12%. Excise duty of 1.35/liter on unbranded petrol.

(g) (h) (i)
(j) (k)

(l)

(m) Excise duty of 4.6/liete on unbranded diesel.
(n) (o) (p)

Excise duty on pharmaceuticals reduced to 8% from 16%. Full excise duty exemption on refrigerating equipments. Full excise duty exemption on anti aids drugs. Full excise duty on naphtha withdrawn for manufacture of polymers.
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(q)

(r)
(s)

Excise duty shelved to 8% on water purification items. Full excise duty exemption on small cars reduced to 12%. Excise duty on two wheelers reduced to 12%. Excise duty on filtered and non filtered cigarettes put at par. Peak rate of customs duty untouched. Customs duty for steel scarped. Custom duty for bulk drugs cut to 5% from 10%. Custom duty on phosphoric acid reduced to 5%.

(t)
(u) (v) (w) (x) (y)

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