Govt sugarcoats new taxes, Budget through

Cash withdrawals will now attract 0.1 per cent tax on withdrawals of Rs 25,000 and above on a single day, up from the earlier proposed Rs 10,000 limit. For businesses, this limit will be Rs 1 lakh per day. Withdrawals from savings accounts will not attract this tax and if maturing fixed deposits are transferred to savings accounts, these will also be exempt.

Chidambaram also announced raising of the IT exemption limits for women to Rs 1.35 lakh from the Rs 1.25 lakh per annum proposed in the Budget. Senior citizens would also have a exemption limit of Rs 1.85 lakh per annum from the earlier proposed Rs 1.50 lakh.

‘‘Women and senior citizens are the constituents of the UPA government and we will take care of them,’’ Chidambaram told the Opposition parties who had returned to the Lok Sabha after three days of boycott, only to debate the Finance Bill.

The Finance Minister also proposed to clear the air around the FBT, which got a lot of flak from India Inc. For many categories, the deemed fringe benefit (the FBT is 30% of the deemed fringe benefit of the employer’s expenditure) has been reduced from 50 per cent to 20 per cent.

Other obvious problem areas — like advertising — have been removed from the ambit of the tax, but the FBT on employer’s contribution to supperannuation fund has been retained.

In sum, the tax stays. ‘‘Effective corporate tax rates in the country are as low as 20 per cent and we propose to raise this by an additional 1.5 per cent,’’ Chidambaram explained.

So, expenses incurred by companies on entertainment, conferences, sales promotion (excluding advertising), employees’ welfare, conveyance, tour and travel, telephones, repairing of cars and aircraft will all be now taxed at 30 per cent of the deemed fringe benefit (20 per cent).

Festival celebrations, health club and other club facilities, gifts and scholarships would be charged on 50 per cent of the companies’ expenditure under these heads.

For special categories like expenses for employers’ in the hotel business, or tour and travel expenses for those in car rentals, specific to the nature of business they are involved in, the FBT will be calculated on 5 per cent of the company’s expenditure in these specific heads.

The Finance Minister also announced some changes in indirect taxes, basically to correct anomalies that had crept in. The 4 per cent CVD on imported parts of mobile phones was removed, while laptop imports that were not included in the category of imported computers attracting 7 per cent customs duty have now been included along with computer parts like monitor, CPU mouse etc. Premium for farm income insurance schemes will also be exempt from service tax.