A security transaction tax will, however, be chargeable on the value of taxable security transactions and is to be collected by the stock exchange and paid to the Government's account. The security transaction tax will be at the rate of 0.15 per cent of the value of the security transactions.

What is the value on which turnover tax will be computed?

What are the new tax rates for short-term capital gains?

Short-term capital gains will suffer a tax at only 10 per cent as against the normal rates of tax that are presently applicable.

If their basic exemption is not exhausted against their other incomes, individuals and Hindu Undivided Families can set off the unexhausted portion against such short-term capital gains and pay tax at 10 per cent only on the balance.

Deductions under Chapter VI-A can be claimed against such short-term capital gains. Rebates can also be claimed against the tax on such short-term capital gains. Transactions resulting in short term capital gains will also be liable for the turnover of 0.15 per cent.

Personal income

Has the basic exemption limit for personal income tax been increased to Rs 1,00,000?

No. What is proposed is that individuals having a total income which does not exceed Rs 1,00,000 will be entitled to a rebate equal to the amount of the tax of the individual.

Interestingly, this will mean that if an individual has a total income of Rs 1,00,000, he will have no tax liability while an individual with a total income of Rs 1,00,100 will end up with a tax liability of Rs 9,020. It may be noted that the rebate is proposed to be available only to resident individuals.

Is there any change relating to set-off and carry forward of losses?

It is proposed to prohibit the set off of loss under the head "Profits and Gains of Business or Profession" against income under the head "Salaries".

This was hitherto permissible and the proposal is likely to create hardship to many assessees who carry on a business or profession in addition to having a salary income. Loss under the head "Profits and Gains of Business or Profession" can be set off against income from other heads.

Further, such loss can be carried forward and set off against income under the head "Profits and Gains of Business or Profession" within eight assessment years immediately succeeding the assessment year in which the loss was first computed.

Are there any tax incentives proposed for the physically and mentally challenged?

Sections 80DD and 80U are proposed to be amended with effect from assessment year 2005-2006 to provide that the deduction will be available in respect of medical treatment or nursing or a handicapped dependant relative suffering from "autism", "cerebral palsy", "multiple disabilities" in addition to the disabilities for which the deduction is already available.

Similarly, it is possible that persons suffering from the above mentioned handicaps can also claim the deduction permissible under Section 80U.

Presently, Sections 80DD and 80U allow a deduction of Rs 50,000 if the person suffers from the disability or handicap and Rs 75,000 if the person suffers from a severe disability or handicap.

Is there any benefit that will be available to Government employees?

The Central Government contribution and employee contribution to a pension scheme will qualify for a deduction. This will be a deduction in computing the employee's income. The amount that will qualify for deduction cannot exceed 10 per cent of the salary, towards employees' contribution and 10 per cent of the salary towards employers' contribution.

On closure of the scheme or on opting out of the scheme or when the pension is received, the same will be treated as income and taxed in the hands of the employee. What will be taxed will not be merely the employees' and employers' contribution but also any accruals in the scheme.

Gifts

Are all gifts to be treated as income?

With the Gift Tax Act being made inoperational, there was no tax leviable on gifts either in the hands of the donor or in the hands of the donee. It is now proposed to introduce gift tax in a different form. It is proposed that a gift received by an individual or HUF will be treated as income and assessed as income from other sources. This, however, will not apply to a gift received from any individual who is a relative. The term relative has been clearly defined as:

However an aggregate gift of Rs 25,000 per year received from persons other than relatives will not be treated as income in the hands of the donee. It may be noted that limit of Rs 25,000 is an aggregate limit for all gifts received from various persons who are not relatives of the individual. It is also proposed that gifts received by an individual at the time of his marriage will not be treated as income in the hands of the donee. It is proposed to make this provision effective only in respect of gifts received on or after September 1, 2004.

Non-residents

Is there any incentive for non-residents?

No. On the contrary, interest credited to a non-resident (External) account of an individual was hitherto exempt. But now it is proposed that the interest will not be eligible for exemption in the hands of the non-resident individual.

Similarly, interest credit to a non-resident or a resident but not ordinarily resident from deposits in foreign currency in a bank, which is approved by the Reserve Bank of India, shall not be eligible for exemption. It is proposed that these will be effective in respect of interest credited on or after September 1, 2004.

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