UNION BUDGET 2010-11

Changes in Direct Taxes proposed in the Union Budget 2010-11.

TAX RATES

1. Slabs of Income Tax for the Financial Year 2010‐11, are proposed to be changed. The new slabs are:

• Income Up to Rs.1,60,000 NIL
• Rs.1,60,001 to Rs.5,00,000 10 per cent
• Rs.5,00,001 to Rs.8,00,000 20 per cent
• Rs.8,00,001 and above 30 per cent

2. In case of a woman assessees, the threshold limit will remain Rs.1,90,000 and for senior citizens it will be Rs.2,40,000.

3. Surcharge on Income Tax of Domestic Companies, if income above Rs. 1 crore, reduced to 7.5% from 10%.

4. MAT has been increased to 18%.

COMPLIANCE RELATED

1. Limit of Tax Audit increased to Rs.60 lakh from Rs.40 lakh, in case of Business and Rs.15 lakh from Rs.10 lakh in case of Profession.

2. Turnover Limit for presumptive taxation also increased to Rs.60 lakh, i.e. in case of ANY BUSINESS (other than that of plying, hiring goods carriages), if the Turnover is less than Rs.60 lakh, then 8% of the Turnover will be deemed to be the Profit of the Business. If Net Profit is less than 8% then the Books of Accounts will be required to be audited.

3. Maximum Penalty for Failure to get the Books of Accounts audited, increased to Rs.1.50 Lakh from Rs.1 Lakh.

(These changes will be applicable from Financial Year 2010‐11)

GIFTS

1. In the last Budget, the Purchase of Property for inadequate consideration (i.e. Purchase consideration less than Fair Market Value or Stamp Duty Value) was made taxable. In this Budget a change has been made that the receipt of immovable property will be taxable only if it is received without any consideration. If a IMMOVABLE PROPERTY is purchased and the purchase value is less than stamp duty value (i.e. inadequate consideration), then the balance will not be added to the Income of the recipient. However if the Immovable Property is received without any consideration (Gift), it will continue to be taxable.

2. If a property is received by a person (for inadequate or without consideration) and it forms part of stock in trade or raw material of his business, then it will not be added to the income of the recipient.

DEDUCTIONS

1. Deduction u/s 80CCF upto Rs.20000/‐ will be available to Individuals & HUF on subscription during Financial Year 2010‐11 made to long term infrastructure bonds. This will be over and above the 80C limit of Rs. 1 lakh.

2. Contribution to Central Government Health Scheme will also be allowed as deduction u/s 80D (Medical Insurance Premium).

TDS

1. Threshold limits for deduction of Tax at Source have been increased. New limits will be effective from 1st July 2010.

NATURE OF PAYMENT EXISTING LIMIT NEW LIMIT

Winning from Lottery 5000 10000

Winning from Horse Race 2500 5000

Payment to Contractors

(Single payment) 20000 30000

(Total in year) 50000 75000

Insurance Commission 5000 20000

Commission 2500 5000

Rent 120000 180000

Fee for Professional Services 20000 30000

2. In case of any Interest, Commission, Rent, Fees for Professional Services, Payment to Contractor (Freight etc.) paid during the year and on which TDS is not deducted and deposited during the year, then the amount is not allowed as deduction while computing Total Income. Now, w.e.f. Financial Year 2009‐10, if TDS is deducted during the Financial Year and deposited before the due date of Filing the Return, the amount will not be disallowed.

3. Rate of Interest payable in case of delay in payment of TDS has been increased to 1.5% p.m. (from date of deduction to payment) from existing 1% p.m. (w.e.f. 1st July 2010)