you can save up to Rs 44,000 Tax a year

From the point of retail investors the budget is good; he has given tremendous relief for income tax.

Salaried professionals: A male earning up to Rs 5 lakh a year will save Rs 44,000 by way of income tax. Now, he will pay only Rs 55,000 by way of income tax, which means that the effective tax rate is down to only 11 per cent. That means more money of up to Rs 44,000 per annum is available for investment.

For women, the difference is Rs 43,500 per annum. For senior citizens it is up to Rs 39,500 per annum. That will be a great saving for working professionals.

Also, if you buy medical insurance for your parents, you get an additional relief of Rs 15,000.

Short term capital tax: People will be forced to hold on to their shares for at least a year because short term capital gain has become 15 per cent. That is a positive disincentive to sell within in one year. If there is less selling pressure, the stock market will be forced to improve.

Stock market advice: One thing bothering everyone is this Rs 60,000 crore that will cost the exchequer. If banks are not reimbursed by the Finance Minister, than they (the banks) will take a hit and therefore banking stocks may fall. We have to wait and watch.

Wait and watch. Ultimately the stock markets will be driven by global trends. If markets fall in US, Asia etc, it will affect us. Investors must be cautious.



Senior citizens: Reverse mortgage loan scheme -- if you have a house, you can give your house (mortgage your house to the bank while still living in it) and take a loan. The money you receive will not be taxable. It can become your regular income.


Consumers gain: Two-wheelers, small cars, tea and coffee and other small things, will get cheaper.



Last words: No googlys! But I did not expect him to give so much relief on the personal income tax. It was a substantial relief to the middle class, to both the self-employed and to professionals.

Source : MoneyControl

Vodafone challenges Indian tax law

Vodafone Challenges US$2bn Indian Tax Bill

London, June 23:
British telecom major Vodafone is challenging in the Bombay High Court a change in India's tax laws which have been applied retrospectively to its 11.1 billion dollar purchase of a controlling stake in Hutchison Essar.

Vodafone said in a statement on Friday that it has submitted an amended writ petition challenging the "constitutionality of the retrospective amendment of the changed tax law."

A legal hearing in the Bombay High Court is due to restart on Monday (June 23) to decide on the legality of a 2 billion dollars tax bill based on the purchase of the Hutchison stake, The Independent reported.

If the tax department can show that the India based Vodafone-Essar acted as an "agent" of Vodafone in its overseas purchase (arranged via Mauritius) of Hutchison's shares in Hutchison-Essar, then it may be possible that Vodafone-Essar could be held liable for the tax demand.

When Vodafone bought a controlling stake in Hutchison Essar from the Hong Kong-based Hutchison conglomerate in May 2007, the UK group's advisors confirmed that because the deal was between two foreign companies, no tax was due to the Indian authorities. But the Indian Government does not agree, and the row is set to continue.

This week's hearing will decide on the validity of a Vodafone writ seeking an injunction against the tax authority's investigation of the deal. Whichever way the court rules, and a decision is not expected for a number of weeks, it is likely that the losing side will lodge an appeal with the Supreme Court.

The case has major implications for all foreign companies pursuing Indian assets. Vodafone's argument, and the basis of its writ, is that the company cannot owe tax on the deal because the transfer of shares took place between a Dutch group owned by Vodafone and a Hutchison company registered in the Cayman Islands, both of which are outside India's jurisdiction.

But the government says that it does have a capital gains claim because the assets are based on Indian soil.

The dispute started last year, and was complicated further by a retrospective change to the Indian tax laws in February's Budget.

Source : Popular New sites

'zero tax' sops on pay package of Rs 4 lakh

Difficult to believe, but that is true! As a salaried taxpayer, you can structure your annual pay package of up to Rs 4,00,000 on a zero tax basis. You must endeavour to negotiate your pay package in a manner that the same can include maximum possible tax-free allowances and perquisites.

This would ensure that you are able to take maximum take-home pay per month with the minimum deduction of tax. Here is an illustrated pay package under which the allocation of your salary, allowances and perquisites could be structured as under:

Basic and DA of Rs 2,50,000

On the presumption that you are paying annual house rent of Rs 60,000, you can receive and claim House Rent Allowance of Rs 35,000 (being the amount in excess of 10% of your Basic and DA) as exempt under Section 10 (13A).

Transport Allowance of Rs 800 per month for meeting to and fro expenses from your home to office.

Annually Rs 9,600 can also be claimed by you as exempt under Section 10 (14). Conveyance Allowance of Rs 2,000 per month for discharging your official duties. Annually Rs 24,000 can be claimed by you as exempt under Section 10 (14).

Uniform Allowance of an annual amount of Rs 10,000 towards purchase and Rs 500 per month (annual Rs 6,000) to meet the expenses for washing and maintenance of uniform. Thus, annually Rs 16,000 can be claimed by you as exempt under Section 10 (14).

On the basis of your two children being educated at school or college, Children’s Education Allowance for each child at Rs 100 per month can be claimed exempt by you under Section 10 (14) at Rs 2,400 annually.

Reimbursement of medical expenses of up to Rs 15,000 annually can be claimed exempt by you under Section 17 (2).
Food coupons or paid vouchers provided by your employer being treated as exempt perks (not liable to FBT also), such coupons for a value of Rs 2,500 per month (annually Rs 30,000) can be planned under the package and claimed exempt.

Based on the assumption that Leave Travel Concession of Rs 18,000 is paid annually to you, the same can be claimed exempt under Section 10 (5), twice in a block of four years.

Actual exemption can be stretched even further!

In the above case, the various allowances and perquisites to the extent of Rs 1,50,000 as shown herein above would be exempt, leaving your taxable salary at Rs 2,50,000 out of the total pay package of Rs 4,00,000. You can plan appropriate investments or allocations by way of contribution to PF or PPF, payment of Life Insurance Premium, etc, up to Rs 1,00,000, which are eligible for deduction under Section 80 C and thus ensure that your Total Income stands reduced to Rs 1,50,000.

This being within the basic exemption limit, the income-tax payable thereon would work out to ‘nil.’ You can thus effectively enjoy a ‘Zero Tax Status’ in respect of your total pay package of Rs 4,00,000.Depending on the facts of your case, the nature and extent of exemption of some allowances such as HRA, LTC, etc, could vary and would call for appropriate review.

In case you are not paying any house rent, you could have possibly invested in a house of your own and be entitled to claim interest on housing loan up to Rs 1,50,000 as a special deduction under Section 24, which would enable you to stretch your actual tax exemption much beyond Rs 4 lakh!

Courtesy - http://timesofindia.indiatimes.com

Govt Imposes Service Tax On Foreign Tax

Your vacation may now cost more with the government deciding to enforce collection of service tax from all tour operators on foreign trips. The additional levy on outbound tours would include the education cess and higher and secondary education cess besides the service tax.

Recently, the Commissionerate of Service Tax in Delhi had called a meeting of all major tour operators where the travel and tourism companies were apprised about their service tax liability. When this did not have the desired effect, the Delhi commissionerate booked three big players in the outbound tour segment for more than Rs 23 crore on account of tax evasion.

Sources said an investigation is on against others who have not yet deposited service tax. As the service tax and other additional cess are being recovered for the financial year 2006-07, a post-trip bill from your tour operator should not surprise you.

The coverage of service tax is being widened with more services being brought under the tax net. The government has decided to widen its audit activities starting April 2008 and cover industries such as cargo handling and packaging, outdoor caterers, mandap keepers, custom house agents, computer training institutes, broadcasting agencies, event management firms, tour operators and architects, besides services like banking, financial, insurance, BAS, management consultancy, real estate, IPR etc.

In the club category, the Delhi commissionerate had booked some major clubs early this year.

Source : TimesofIndia

Commodity Transaction Tax to stay

The Commodity Transaction Tax (CTT) on the futures market, against which there was an intense lobbying within and outside the government since the presentation of the Budget, is here to stay.

Rejecting the demand for withdrawal of CTT, Finance Minister P Chidambaram today said in the Rajya Sabha that "I am an old war horse in this game, we will live with this criticism".

As the stock brokers have accepted the Securities Transaction Tax (STT), the traders in commodity futures market will also accept the new tax, the Minister said.

The Budget had proposed to levy 0.017 per cent CTT on transactions in the commodity futures trade, which runs into lakhs of crores of rupees.

With the government completing the budgetary process there is no scope of withdrawal of the tax proposal which was vehemently opposed by the commodity exchanges.

The new tax proposal saw competing commodity exchanges coming on a common platform and jointly meeting several ministers including Agriculture and Consumers Affairs Minister Sharad Pawar to pursue their demand for withdrawal of CTT.

BJP leader Jaswant Singh also questioned the rationale behind imposition of the tax.

"We are disappointed with the development. This will affect volumes of the commodity exchanges as increased cost will discourage traders from participation," said MCX managing director Joseph Massey.

Govt to come out with new income tax code

Government today said it will soon come out with a new Income Tax Code to streamline the taxation structure and reduce the plethora of exemptions given to various segments of taxpayers.

"I am confident that the new I-Tax code, that will be placed in the public domain shortly for discussion, will reflect my philosophy," Finance Minister P Chidambaram said, while winding up discussion on the Finance Bill 2008 in the Lok Sabha.

The new tax code would become law after debate and deliberations, he said, adding "eventually, we will have to move towards the system of taxation where the exemptions are few, each exemption is reviewed periodically, and each exemption comes to an end after a reasonable period of time."

Direct tax code would replace the existing Income Tax Act, which was enacted in 1961, and would subsume other direct tax legislations.

Pointing out that the marginal rate of taxation, including education cess stood at 33.99 per cent, the minister said: "My endeavour has been to increase the effective rate of corporate tax paid by corporations, but I confess my efforts are not entirely successful because of demands for continuing exemptions or introducing new exemptions."

Chidambaram added: "I have succeeded, to some extent, in removing or imposing sun set clauses, but I cannot say that I am fully satisfied. The work on this regard has to continue."

Together with indirect tax exemptions, direct tax exemptions are leading to revenue loss for the government.

As per the official figures, given by Minister of state for Finance S S Palanimanickam in the Rajya Sabha today, Rs 2,39,712 crore revenue was forgone on account of direct and indirect tax concessions during 2006-07.

Source - Business Standard

TDS on rental income to be computed minus service tax

Giving some reprieve to corporate houses working out of leased property, the finance ministry has said tax deducted at source (TDS) on rental income should be calculated on the amount of rent paid, without including the service tax charged on it.

Doubts had cropped up on whether TDS should be calculated on the gross rental, inclusive of service tax or on net rental, excluding the amount paid as service tax. The Central Board of Direct Taxes (CBDT) also got many representations in this regards, following which it has clarified the matter.

“Service tax paid by the tenant doesn’t partake the nature of ‘income’ of the landlord. The landlord only acts as a collecting agency for government for collection of service tax,” the CBDT has clarified. So TDS, under sections 194-I of the Income Tax Act, would be required to be made on the amount of rent paid without including the service tax, it further added. TDS is deducted on rentals which are over Rs 12,000 per month at the rate of 20% for Companies and 10% for individuals.

The clarification would help a number of BPO and retail Companies which work out of leased offices. Budget 2007-08 had introduced the proposal to levy service tax at the rate of 12.36% on rental of immovable property used for commercial purpose.

Source : FinancialExpress

Excise Tax to go the e-way

The Coimbatore Central Excise Commissionerate is preparing for the implementation of an e-governance project that is likely to be rolled out in a couple of months.

The Commissioner, C. Rajendiran, told The Hindu that Coimbatore was one of the eight commissionerates chosen in the country for the first phase of implementation of the Automation of Central Excise and Service Tax project.

With 2,000 Central Excise assessees, about 14,000 registered Service Tax assesses, excise revenue of Rs. 360 crore and Service Tax revenue of Rs. 324 crore, it was one of the “compact commissionerates.” It had 32 ranges in Coimbatore, Tirupur and Pollachi and the entire area would be covered under the project.

The project would have nine modules and seven of it would be assessee-focused. “Computerisation is not merely for data storage. It should facilitate service to customers.” Tasks such as registration, grant of permissions, refund and rebates and filing of returns would be available online with the implementation of the project.

Training programmes were on for the officers. Orientation programmes and workshops would be held for industrial associations.

Under the proposed project, the assessees would move over to the online system completely. “We are looking at 100 per cent comprehensive coverage.” The hardware required for the project would also be ready in a couple of months.

Source : Hindu

Deduction For AY 2008-09

1. House Propery

You would be allowed a deduction on the investments up to the amount of long term Capital gain on House property if you have a long term capital gain as computed above and have made investments in either of the following:
a)Purchase of a new house property or
b)Invested the sale proceeds in Capital Account scheme 1988 or
c)Invested in NABARD bonds or
d)Invested in NHAI bonds or
e)Invested in SIDBI bonds

2. Securities and others

You would be allowed a deduction on the investments, restricted to the amount of long term Capital gains if you have a long term Capital gain as computed above and have made investments in either of the following:

a) Purchase of a new house property – deduction restricted to (cost of new house X Long term capital gains on securities / Net consideration ) OR
b) Investment of the sale proceeds in Capital Account scheme 1988 or
c) Invested the sale proceeds in NABARD bonds or
d) Invested the sale proceeds in NHAI bonds or
e)Invested the sales proceeds in SIDBI bonds

Courtesy - Popular Sites

Capital Gains 2008-09

Deductions under Capital Gains

You should provide data in this section if you have sold any of the following Capital assets -

-House property
-Securities (Equity stock, Debentures, Mutual Fund Investments, Zero coupon Bonds)
-Others – Agricultural land, Gold, Silver


Ascertain the type of Gain/Loss
The period of holding of your property determines the type of capital gain/ loss you have made.

Type of Asset Short Term Long Term
House property Held for less than 3 years Held for more than 3 years
Securities Held for less than 1 year Held for more than 1 year
Others Held for less than 1 year Held for more than 1 year


Computation of Gain/ Loss

a.Net Sales Value = (Sales Price less the cost incurred for sale)
b.Purchase price = (Purchase Price plus any other expenses incurred for purchase- indexed by the year of expense)
c.Profit / Loss (a-b)

Courtesy - Popular Sites

Deductions for AY 2008-09

Deductions under House Property

You are required to enter data in this section only if you owned a house property which was used for residential purposes, for any part of the year.

Self Occupied Property – if you have stayed in the property for the whole or any part of the year and for the rest of the year it was not available to be let out then it would be treated as self occupied property.

Let out property - If you have let out the property or have made the property available for rent for any part of the year then it would be treated as a let out property.

Deductions Available
1. If your property is not let out for the entire period for which it was available to be let out, you are entitled to a deduction for the period for which it was vacant.
2. If you have paid any amount as interest towards repayment of loan taken for the property then you are entitled to a deduction to a maximum amount of Rs 1.50 lakhs.

Deductions for AY 2008-09

Deductions under Salary

You are entitled to deduction upto an overall limit of Rs. 1 lakh for any amount that you have invested by making purchases in any of the schemes mentioned below during the corresponding financial year (FY) which starts from April 1 and ends on March 31:

Please note that if you have already provided the deduction details to your employer and the employer has already considered the same in computing the tax you MUST NOT ENTER THE SAME DATA AGAIN in the deductions list.
1. Your contribution towards Provident Fund which is deducted from you salary to a maximum limit of 12% of your basic salary.
2. Purchase of National Savings Certificates.
3. Any amount that you have paid towards life insurance premium for yourself and your immediate family.
4. Any amount that you have invested in Public Provident Fund.
5. Any amount that you have invested in Unit Link Insurance Policy.
6. Any principal amount that you have paid towards repayment of loan taken for a purchase of a property, construction of which is completed and has been handed over to you.
7. Any amount paid towards tuition fees of your children – maximum of Rs. 100 per month per child is allowed.
8. Any investments in schemes or funds which provide deduction under 80C.
9. Any amount paid towards any insurance policy which is governed under section 80CCC. This has a limit of Rs. 10000 per policy per annum.
10. Amount paid as donation to any charitable organization who qualify for deduction under section 80G. Please check whether the amount donated by you qualifies 50 percent or 100 percent. Dependent on the same you would be able to claim deductions. For example, if the organization qualifies for 50 percent of the amount donated and you have donated an amount of Rs. 1000 then you would qualify for a deduction of Rs 500 while if the organization qualifies for a 100 percent deduction then you would be entitled to the full amount of Rs1000.
11. If you have spent any amount for medical treatment for dependent children you are entitled to deduction for all expenses incurred by you on such treatment.

Important Dates (Advance Tax Payment)

Financial Year (FY) - The period from 1st April to 31st March. (For example, FY 2007-2008 would have period 1st April 2007 to 31st March 2008)

Filing of your Return for a Financial Year

Last date for filing your return as an individual is 31st July after the end of the financial year. (For example, for FY 2007-2008 it would be 31st July 2008).

Sometimes the dates are also extended by the Income Tax department. For extension of dates please keep a watch.

Advance Tax dates for a Financial Year

•1st installment – 15th September within the Financial Year (For example, for FY2007-2008 it would be 15th September 2007)
•2nd installment – 15th December within the Financial Year (For example, for FY 2007-2008 it would be 15th December 2007)
•3rd installment - 15th March within the Financial Year (For example, for FY 2007-2008 it would be 15th March 2008)