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No tax on savings cash withdrawals New Delhi, May 2 Under the amendments introduced in the Finance Bill 2005, which was passed by voice vote in the Lok Sabha today, the tax on cash withdrawal will be applicable only to current account holders and raised the threshold limit Rs 25,000 from the earlier proposed Rs 10,000 for individuals and Hindu Undivided Families (HUFs). In case of companies the threshold limit shall be Rs 1 lakh. Effectively, this means that business, firms and institutions will have to pay a 0.1 per cent tax only if they withdraw Rs 1 lakh or more in a single day from their current accounts. Similar threshold limits have been fixed for term deposits as well. In other words, an individual or a HUF would be liable to pay a tax of 0.1 per cent only if the value of the fixed deposit which is redeemed is more than Rs 25,000 while for companies it would be Rs one lakh or more. However, no tax would be levied, if the amount after maturity of term deposits is transferred to the account holders in the same bank. The new tax proposals on banking cash transactions will come into force from June 1, 2005. Finance Minister P. Chidambaram said exempting savings accounts from banking cash transaction tax would mean that most of the people go out of this tax net. The aim of the cash transaction tax is to maintain a tax trail as there are evidence of a non-tax payer depositing from Rs 1 crore to Rs 98 crore and withdrawing cash ranging from Rs 23 crore to Rs 623 crore. “The idea behind this tax is to ensure that banks are not used for money laundering by keeping a tax trail,” the Finance Minister said. The Finance Minister also sought to blunt the Opposition criticism about providing only lip service to the fairer sex and elderly and announced further relief to women and senior citizens. He raised the income tax exemption limit for women by another Rs 10,000 to Rs 1,35,000 and for senior citizens by additional Rs 35,000 to Rs 1,85,000. The corresponding income tax rates for women and senior citizens have
Similarly, citizens who earn less than Rs 1,85,000, would not have to pay any taxes, while those earning between Rs 1,85,000 and Rs 2,50,000 will come under the 20 per cent tax slab and income beyond Rs 2,50,000 would attract 30 per cent tax The proposed FBT, which have attracted a lot of flak from the corporate world, have been retained, although in a whittled down format. Mr Chidambaram diluted provisions of the Fringe Benefits tax on employers exempting expenditure on advertisement and other sales promotions such as business conventions and sports sponsorship from the ambit of the contentious tax. A significant reduction has also been announced in FBT. For industries such as hotels, pharmaceuticals, computer software and construction, the FBT rate has been slashed down to 5 per cent from the earlier proposed 25 per cent. Expenditure on sales promotion through advertisement of any form in any print or electronic media or transport system, holding or participation in any press conference or business convention, exhibition, signs, art work, painting banners etc will not be considered as expenditure on sales promotion, including publicity In addition, expenditure incurred on payment of food or beverages provided by the employer to his employees in office or factory and expenditure on payment through paid vouchers which are not transferable and usable only at eating joints or outlets will not be treated as FBT Expenditure on employees welfare will attract FBT but not the expenditure incurred or payment made to fulfil any statutory obligation or mitigate occupational hazard on provide first aid facilities in hospital or dispensary run by employers. Other expenditures that will come under FBT are conveyance, tour and travel including foreign travel, use of hotel, boarding and lodging facilities, repair, running, maintenance of motor cars and aircraft and the amount depreciation on them. Use of telephone including mobile phone will attract FBT but expenditure on leased telephone line will be exempt. Maintenance of any accommodation like guest house except those used for training purposes, festival celebrations, use of health club and similar facilities, use of any other club facilities, gifts and scholarships will come under the scanner of FBT. Amendments have also been brought about in the some of the indirect tax proposals and Mr Chidambaram reduced the excise duty on molasses from Rs 1,000 per tonne to Rs 750 and the countervailing duty on import of nylon nets for tuna fishing from 15 per cent to five. The Finance Minister also exempted the premium under the farm insurance scheme from service tax on grounds that premium under similar scheme — national agriculture insurance scheme — has already been exempted from it. He also extended the 7 per cent customs duty on laptops to all other computer imports like monitor, computer processing unit and mouse, and exempted 4 per cent countervailing duty on components for mobile phone manufacturing in India. Excise duty on isolated soya protein has been reduced from 16 per cent to 8 per cent as it is an important source of protein. |
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