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All about FM's new tax proposals; some I-T relief for individuals
February 28, 2007

In a play-safe Budget, Finance Minister P Chidamabaram on Wednesday gave marginal relief to income tax payers and announced some anti-inflationary measures in his fourth budgetary exercise, which was received with disappointment by trade and industry.

Personal and corporate income tax rates remained unchanged while the threshold exemption limit has been raised by Rs.10,000 giving a relief of Rs.1,000 to all individuals. The deduction for medical insurance premium has been hiked to Rs.15,000 and it will be Rs.20,000 for senior citizens, that is those above 65 years of age.

The new threshold limit in income tax for women will be Rs 145,000 and for senior citizens Rs 195,000.

However, Chidambaram hiked the education cess from two per cent to three per cent to net an additional Rs 5,000 crore (Rs 50 billion) to fund secondary and higher education As anti-inflationary measures, Chidambaram announced a ban on futures trading on staples wheat and rice in all commodities exchanges.

He also gave excise duty relief for cement sold in retail at Rs.190 per bag and exempted crude as well as refined edible oils from additional countervailing duty of four per cent to make them affordable.

The duty on sunflower oil, both crude and refined, was reduced by 15 per centage points.

However, for the industry the divident distribution tax has been hiked from 12.5 per cent to 15 per cent while money market mutual funds and liquid mutual funds will attract 25 per cent dividend distribution tax.

The scope of Fringe Benefit Tax has been expanded to include employees stock option plan. While the jittery stock market tanked 540 points with BSE closing below 13,000 points level on top of global melt down, corporate leaders were disappointed at not getting any industry-specific incentives or relief in corporate taxes and surcharge.

By and large the industry and market leaders feel that the budget gave negative sentiments in the short-term but expressed the hope that the economy would emerge stronger in the long run.

"I have not done anything to hurt growth," Chidambaram said at the traditional post-Budget briefing while stressing that a number of measures have been taken to moderate inflation.

Other tax proposals

Indirect Tax Proposals

Photograph: Saab Pictures



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