Wish-list for Direct Taxes - Chartered Accountant [Dr] Suresh Surana - kindly carry

Monday, June 22, 2009

 

Please find the below Budget wish-list for Direct Taxes by Dr. Suresh Surana, Mumbai based Chartered Accountant for Hindu Business Line Budget series.

 

His photograph is attached.            

 

For any further queries, please feel free to contact Dr Suresh Surana on 98210 44669.

 

   

Thanks & regards,

 

Varsha Talreja, Paradigm Shift Public Relations [9821195211 / 022 22813797]

 

 

Budget Wish-list – Direct Taxes

 

-          By Dr. Suresh Surana, Mumbai based Chartered Accountant

 

 

Certain significant aspects expected to be addressed in the forthcoming Budget are:    

 

Extension of tax benefits to EOUs and STPs - The export industry has been hit hard by the global economic meltdown and now with the risk of depreciating US$. As such, the export industry is looking forward to extension of the tax benefits available to Software Technology Parks (STPs) and Export Oriented Units (EOUs) for another 3 to 5 years, beyond the sunset financial year 2009-10.

 

A friendly tax structure for Limited Liability Partnerships (LLP) –Although the Limited Liability Partnership Act is effective from 1 April 2009, the manner in which an LLP would be treated for tax purposes is not yet specified by the government. It is expected that in case of LLPs there would be no tax on distribution of dividends/profits of 16.995% which is applicable to companies, and that no capital gains or other tax liability would arise on conversion of an existing partnership firm or company to a LLP.  

 

Abolition of Fringe Benefits Tax (FBT) – The levy of FBT has resulted in huge compliance cost and efforts and is expected to be abolished.   

 

Reduction in the effective tax rates – The effective maximum marginal tax rate (MMR) in India applicable to companies as well as individuals is 33.99% which needs to be reduced to effective MMR of 30%.  

 

Substitution of Dividend Distribution Tax (DDT) – At present the companies are required to pay dividend distribution tax ( DDT ) of 16.995% coupled with the maximum corporate tax rate of 33.99% which pushes the effective tax on corporate income and its distribution to 45.20%. As dividend income is treated as exempt in the hands of shareholders, the shareholders are not able to claim the deduction of expenses, like interest. Thus, the DDT should be replaced with tax on dividends at flat rate of 10% to be deducted at source by the companies.  

 

Increase in the housing loan interest deduction –It is expected that the current deduction limit for housing loan interest would be increased from Rs. 1.5 lakhs to Rs. 2.5 lakhs p.a.

 

END.