There is considerable relief as regards direct tax proposals, since the apprehensions of possible roll back of concessions and hike in the tax rate have proved to be baseless. Postponement of the new Code by another year is also equally welcome.
As regards personal taxation, there will be variation in the slabs for tax rates, so that all taxpayers with income of Rs.8 lakh, including women and senior citizens, would get a relief of Rs.50,000 annually with others below the limit getting a correspondingly less relief. Cesses, however, will continue. There is a further exemption above the ceiling allowed under Sec. 80C for investment in infrastructure bonds up to Rs.20,000 under the proposed Sec. 80CCF.
As regards corporate taxation, surcharge for domestic companies stands reduced from 10 per cent to 7.5 per cent. But then it is offset by increase in the rate of Minimum Alternate Tax (MAT) from 15 per cent to 18 per cent, so that tax which is bad is made worse by the hike.
The proposed Sec. 56(2)(viia) targets a new class of deemed income on transfer of shares for firms and closely held company on acquisition of shares at a concession from 1st June, 2010.
An amendment to the definition of Sec. 2(15) barring exemption for those charitable trusts and institutions with the object of general public utility having commercial or business activity will continue to be exempt only if their receipts do not exceed Rs.10 lakh during the year. This amendment is retrospective from the assessment year 2009-10.
There is no roll-back of incentives as feared. There are only extension and relaxation. Weighted deduction for scientific research is enhanced. Exemption for research associations is recognised. Sec. 35AD gets extended to the hotel sector and conditions relaxed for those in petroleum oil pipe net work distribution. Some conditions are relaxed retrospectively as for housing development under Sec. 80IB. The time limit for the hotel industry for Common Wealth Games in Delhi and around has been extended from March 31, 2010, to July 31, 2010.
Conversion of firm to Limited Liability Partnership (LLP) was treated as not liable for capital gains tax in the memorandum explaining the amendment by the Finance (No.2) Act, 2009. It is now made clear that a company would get a similar exemption, if converted to LLP, only if its turnover does not exceed Rs.60 lakh subject to other conditions. If the conditions are satisfied, right to carry forward and set off of losses and depreciation would be permissible but not the MAT tax credit.
Sec. 56(2)(vii) deeming concession in price for transactions in immovable property as income is now dropped retrospectively.
A most welcome feature is the upward revision of threshold limits for tax deduction at source of all items, other than interest under Sec. 194A.