India: Union Budget 2003 - A Synopsis

Last Updated: 29 April 2003
Article by Keshav Jetsey

Income Tax Proposals

Salaries:

For salary income upto Rs: 5 lacs, standard deduction will 40% or Rs: 30,000 whichever is lower.

For salary income above Rs: 5 lacs, standard deduction will Rs: 20,000.

VRS payments upto Rs: 5 lacs will be exempt from tax even if such a payment is made in instalments. This provision will be effective from 1st April 2004 and available for A.Y: 2004 – 05 onwards.

Income from House Property:

Deduction of interest upto Rs: 1,50,000 on loans taken for construction or purchase of self-occupied house property shall be retained.

Income from housing projects for construction of housing units of prescribed specifications and approved by local authorities upto 31st March 2005 will be exempt from income tax.

Capital Gains:

Long Term Capital Gains on shares, which are listed on a recognized stock exchange and bought after 1st March 2003 and sold after 1st March 2004 will be exempt from Long Term Capital Gains Tax.

This provision, if approved, will be available for one year and reviewed at the time of the next Budget.

Business Incomes:

It is proposed to increase the rate of depreciation on life saving medical equipment from the present 25% to 40%. This is to enable the early replacement of existing equipment with more modern and latest life saving medical equipment.

The benefit of unabsorbed loss and depreciation on amalgamation will be available to hotels u/s 72A of the Income Tax Act, 1961.

Dividend Tax:

The previous budget had sought to tax dividend income in the hands of the shareholders at the rates applicable to them. This had resulted in the double taxation of the same income.

This budget seeks to rectify this anomaly and it is proposed that with effect from 1st April 2003, dividends will be tax free in the hands of the shareholders.

Distribution Tax:

This budget proposes to re-instate the distribution tax. It is proposed that all domestic Companies distributing dividends after 1st April 2003 will have to pay a Dividend Distribution Tax @ 12.5%. This provision is proposed to be made effective for any amounts declared, distributed or paid as dividends on or after 1st April 2003.

Exemptions From Total Income:

Exemption of export income of computer software units and 100% Export Oriented Units will continue to be available u/s 10A and 10B as originally envisaged.

Presently, this exemption is not available upon change of ownership or shareholding. It is now proposed that this benefit continue to be available even in the case of change of ownership or shareholding due to amalgamation or de-merger.

Benefits To Senior Citizens & Pensioners:

Income of senior citizens upto Rs: 1.53 lacs will now be exempt from Income Tax.

In the case of senior citizens who are also receiving pension, incomes upto Rs: 1.83 lacs will be exempt from tax.

The above provisions will be effective from 1st April 2004 and available for A.Y: 2004 – 05 onwards.

Deductions From Dividend, Interest Income Etc. u/s 80 - L:

At present, individual taxpayers are allowed a deduction u/s 80 L of upto a maximum of Rs: 9,000 on their incomes from dividend, interest etc.

It is proposed to increase this deduction to Rs: 12,000. In addition, further deduction of upto Rs: 3,000 will be allowable for interest incomes from government securities taking the total deduction allowable under this section to Rs: 15,000.

Rebate u/s 88:

It is proposed to include within the purview of tax rebate allowable u/s 88, payments made towards tuition fees to any university, college, school or educational institution situated in India for the full time education of any two children of the assessee provided the sums so paid donot exceed Rs: 12,000 per child.

Rebate under this section shall be within the eligible limit of Rs: 70,000.

This provision will be effective from 1st April 2004 and available for A.Y: 2004 – 05 onwards.

Rebate on Premiums of Certain LIC Policies:

Presently, premiums paid on Life Insurance policies are eligible for tax rebate u/s 88. Moreover, any sum received on maturity of the policy is exempt u/s 10 (10)(d).

It is now proposed in this budget that where the premium paid exceeds 20% of the actual capital sum assured then:

  1. Tax rebate u/s 88 will not be allowable on such premiums.
  2. AND

  3. The exemption available shall not be allowed on the amount received on maturity of such policies. However, the amount received on the death of the person shall continue to be exempt.

T.D.S:

With effect from 1st June 2002, individuals and HUF’s having gross turnover, sales or receipts exceeding the limits specified in s.44AB will have to deduct T.D.S on interest, payment to contractors, commission and brokerage, rent, professional and technical fees paid by them. Presently, the limits are Rs: 40 lacs for businessmen and Rs: 10 lacs for professionals.

This budget now proposes to remove certain practical difficulties arising out of this provision. It is now proposed that no individual shall be liable to deduct TDS fees for professional services provided such sums are paid for purely personal purposes and have no relation to the business of the individual assessee.

Rates of Tax:

The basic exemption limit for individuals and HUF’s is retained at Rs: 50,000. The tax rates for individuals, HUF’s, firms and Companies have also been retained.

Surcharge:

Individuals & HUF’s:

No surcharge will be leviable on incomes of individuals and HUF’s having taxable income upto Rs: 8.5 lacs. Taxable income over Rs:8.5 lacs will attract a surcharge of 10% on the tax payable.

Firms & Companies:

Surcharge in the case of firms and Companies has been reduced from 5% to 2.5%. This has reduced the effective tax rate of Firms and Companies to 35.88% from the earlier 36.75%.

Other Important Amendments & Administrative Reforms:

Removal of Block Assessment Scheme:

Under the existing provisions of Chapter XIV – B, the Assessing Officer is empowered to make a single assessment for the block period of six assessment years preceding the previous year in which the search was conducted.

These provisions are proposed to be replaced by a new section 158 BI to take effect after 31st May 2003. Under the proposed provisions, returns of income for each of the six assessment years has to be filed and the Assessing Officer shall assess or reassess the total income of each of the preceding six years. Moreover the tax shall be chargeable at the rate or rates as applicable to such assessment year.

Effective 1st June 2003, it is proposed that any bullion, jewellery or other valuable article or thing being stock in trade found as a result of the search shall not be seized but an inventory of the stock in trade will be taken.

Moreover, effective 1st June 2003 it is proposed that the seized assets on an application by the assessee shall be released within 30 days from the end of the month in which the asset was seized.

Survey Actions u/s 133A:

Presently, the survey officers can impound the books of accounts or other documents for a period of 15 working days without the approval of the Chief Commissioner of Income Tax.

It is proposed to reduce this period to 10 working days.

Tax Clearance Certificates:

Indian citizens leaving India or any person submitting a tender for a government contract will no longer have to produce a Tax Clearance Certificate from the IT department. Such persons have just to furnish their PAN, intended period of visit to the emigration officers.

Deduction For Statutory Dues:

Presently, deduction u/s 43 – B is denied for payments pf PF, superannuation or other statutory dues where such payment is made after the due date under the relevant Act.

It is proposed to allow deduction in the year of payment and if made before the due date for filing of return, then in the year for which the liability pertained.

SERVICE TAX

This budget proposes to increase the rate of Service Tax from the existing 5% to 8%.

The scope of Service Tax widened and the following services also made liable for Service Tax:

  1. Commercial vocational institutes, coaching centres and private tutorials.
  2. Technical testing and analysis (excluding health and diagnostic testing).
  3. Commissioning & installation services.
  4. Business promotion services.
  5. Internet cafes.
  6. Franchise services.

The content of this article is intended as a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Topics
 
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions