No major relief for companies

The finance minister did not considered the market moods of the corporate sector.

The finance minister did not considered the market moods of the corporate sector. The Finance Bill did not provide any major tax relief to the corporate assessees. The rates of taxation continue to exist at 30 per cent. Also, the rate of surcharge and education cess have been kept unchanged.

Major steps have been taken to promote the health and hospitality sector. A five-year tax holiday was proposed for hospitals constructed in specified non-metro cities.

Similar benefits have also been extended to hotels of two, three or four-star categories situated in specified districts declared as World Heritage Sites. The conditional precedent to this deduction is that the construction and completion of the project should be between the period beginning from April 1, 2008 and ending March 31, 2013.

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Clarification has been inserted with retrospective effect from April 1, 2006, under section 115JB for the purpose of calculating book profits for minimum alternate tax whereby deferred tax, dividend distribution tax, interest, surcharge, cess, etc, are proposed to be added back to book profit for computation of MAT tax liability.

Securities transaction tax paid will now be allowable as business expenditure — as against the rebate from tax payable under section 88E from assessment year 2009-10. It is a clear loss to a trader in shares, as, earlier the STT reduced his tax liability whereas now it will be allowed as an expense.

Dividend received by a company from its subsidiary shall not be subject to payment of Dividend Distribution Tax (DDT) 115-O, provided the subsidiary has paid DDT on such dividend and the domestic company is not a subsidiary of any other company . This amendment will take effect from April 1.

Amount spent on outsourcing of research activities to small companies whose main object is scientific research and development, will be eligible for a weighted deduction of 125 per cent under Section 35.

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The due date for filing the return of income in case of corporate assessees, has been advanced to September 30 of the assessment year, instead of the earlier date of October 31. The amendment will be applicable from assessment year 2008-09.

The tax rate for short term capital gains has been increased from 10 per cent to 15 per cent in respect of listed equity shares and units. This is expected to have a major impact on domestic investors as well as foreign institutional investors (FIIs).

Section 40A(3) has been amended to restrict business expenditure made in cash exceeding Rs 20,000 in a day, even by split voucher to a single person.