The general exemption limit for taxpayers is proposed to be increased from Rs.1.60 lakh to Rs.1.80 lakht with unexpected benefit for senior citizens primarily because of reduction in the age limit for qualification as a senior citizen from 65 to 60 years with the exemption limit at Rs.2.50 lakh against Rs.2.40 lakh previously. The substantial beneficiaries are those super-senior citizens who have completed 80 years on any day before or during the financial year, who will be eligible for the threshold exemption limit of Rs.5 lakh. The ceiling of pension contributions under Sec. 80CCD now at Rs.1 lakh will be removed.

Corporate taxation

The surcharge for domestic companies with total income exceeding Rs.1 crore is reduced from 7.5 per cent to 5 per cent, but compensated by an increase in the Minimum Alternate Tax (MAT) from 18 per cent to 18.5 per cent. Foreign companies will be liable for surcharge at 2 per cent as against 2.5 per cent at present. A new Chapter XI-BA is inserted to make Limited Liability Partnership liable for MAT on a par with companies losing whatever attraction for the limited partnerships from the tax point of view.

Non-resident taxation

Sec. 94A empowers transactions with countries which do not agree to have agreement for exchange of information to be treated as those with associate concerns. Every liaison office is expected to file statement under Sec. 288B, whether it has taxable income or not. These proposals are hardly sufficient to deal with black money abroad. On the other hand, many of the uncertainties under the present law after withdrawal of the three circulars on the subject by the Central Board of Direct Taxes with no further clarifications find no answer in the Finance Minister's speech or the Bill. The effect of the promised implementation of IFRS is also not reflected in the proposals. The tax proposals are hardly likely to encourage foreign direct investment.


The proposed threshold limit available for trusts and institutions with business, but with the object of general public utility is proposed to be enhanced from Rs.10 lakh to Rs.25 lakh.

Incentive deductions: Deduction of capital expenditure permissible under Sec. 35AD is proposed to be extended to notified housing projects and for production of fertilizers effective from Assessment Year 2012-13. Weighted deduction for R&D for approved programmes will stand enhanced from 175 per cent to 200 per cent.

However, sunset provisions are introduced for the power sector under Sec. 80IA(4)(iv) on approvals beyond March 31, 2012, and concession for licensees for production of mineral oil and natural gas beyond March 31, 2011. Special economic zones, which now enjoy deduction under Sec. 80IAB read with Sec. 115JB, will be liable for MAT from Assessment Year 2012-13. They will also lose exemption from the dividend distribution tax under Sec. 115-O from the same year.

Procedural law

Salaried employees with no income other than salary, but with adequate tax deduction at source need not file return, if they fall in the class of assessees notified by the government.

The transfer pricing report would require to be filed in Form 3CEB wherever it is applicable before the due date for filing the return. The tolerance limit of 5 per cent is substituted by a rate which may be notified for any class of transactions.

These and many other changes in the direct tax proposals are by and large cosmetic in nature. It has not many surprises nor are there any shocks. One would miss the long-term vision in this budget as in budgets from successive governments in the past.

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