Financial Daily from THE HINDU group of publications
Friday, Aug 27, 2004
Industry & Economy - Budget
Tax on NRI deposits deferred to next April House passes Finance Bill sans debate
New Delhi , Aug. 26
PARLIAMENT on Thursday passed the Finance Bill, 2004, providing marginal relief on personal income tax to ensure individuals having a total income of little over Rs 1 lakh are not left with a post-tax income of less than Rs 1 lakh.
Amendments to the Bill also included a deferral of withdrawal of tax exemption for lease payments on acquisition of aircraft. The proposed move to tax the interest on non-resident external (NRE) and foreign currency non-resident (FCNR) has also been deferred from September 1, 2004, to April 1, 2005.
These were part of the 55 amendments moved by the Finance Minister, Mr P. Chidambaram, in the Lok Sabha.
The Finance Bill was passed by Parliament without any debate as the National Democratic Alliance (NDA) decided to boycott the proceedings over the alleged "rude" behaviour of the Prime Minister, Dr Manmohan Singh, towards the NDA delegation that met him on Wednesday.
The marginal relief on income-tax, which is likely to cause the exchequer around Rs 300 crore, would ensure that a resident individual having a total income of up to Rs 1,11,250 is not left with a post-tax income below Rs 1 lakh. Thus, an individual with a total income of Rs 1,11,250 a year would be required to fork out tax of Rs 11,250 and would not be entitled for a rebate on account of this proposal.
The Finance Minister, in his July 8 Budget speech, announced a 100 per cent tax rebate for persons with a total income of up to Rs 1 lakh. However, it was later pointed out this would put individuals with income slightly above that level at a disadvantageous position since the marginal cases would be taking home a post-tax income of less than Rs 1 lakh.
"The main purpose for giving the marginal relief is to ensure that an individual having income of more than Rs 1 lakh is not faced with a situation where the increase in tax on account of the new proposal is more than the increase in income beyond the Rs 1-lakh level. The relief is being provided till the point the increase in income beyond Rs 1 lakh is equivalent to the increase in tax," a Revenue Department official said.
On the aviation front, the tax exemption on lease payments for acquisition of aircraft would now be withdrawn for agreements entered into after April 1, 2005.
The Finance Minister had initially proposed that the tax exemption for lease payments would be withdrawn for agreements entered into after September 1, 2004.
"This has been done after taking into account the time needed by the companies engaged in the business of operations of aircraft for reorganising their business as per the new tax regime," officials said.
The provisions relating to taxation of "gifts" from unrelated persons have also been altered to provide that any sum received by an individual or Hindu undivided family (HUF) from an unrelated person without consideration is to be taxed if the amount exceeds Rs 25,000. The only exceptions are the sums received on the occasion of marriage or under a will or by way of inheritance or in contemplation of death.
Further, the controversial provision on falsification of books or documents by a person to induce or abet any other person to evade income-tax has undergone modifications.
It has now been clarified that for the purpose of establishing the charge, it would not be necessary to prove evasion of tax, penalty or interest by the other person.
The amended Finance Bill, 2004, has formalised the changes already announced in securities transaction tax (STT).
The STT would now be levied on equity shares, derivatives and units traded on a recognised stock exchange and also on units of equity-oriented mutual funds.
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