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Monday, May 2, 2005 (New
Delhi):
Retaining the overall rate of the controversial Fringe
Benefit Tax (FBT) at 30 per cent, Finance Minister P
Chidambaram today exempted all savings accounts from the 0.1
per cent banking cash transaction tax.
The government has also raised income tax exemption limit for
women and senior citizens.
According to Amendments to the Finance Bill, 2005,
withdrawals from savings bank accounts from now on will be
totally exempted.
However, withdrawals beyond Rs 25,000 by individuals on
current account and Rs 1 lakh by companies and others will
attract the 0.1 per cent tax.
The initial proposal was to charge a 0.1% withdrawal tax on a
withdrawal exceeding Rs 10,000 out in a single day.
Ad expenses out of FBT
On FBT, Chidambaram proposed to exclude expenditure on
advertisement from the levy.
But any privilege, service or amenity provided directly or
indirectly by an employer by way of reimbursement or
otherwise to employees will attract FBT, which is to be paid
by employers.
Surprisingly, the employers' contribution to the pension fund
will be taxed under FBT. This was something industry wanted
to be scrapped.
Further, any free or concessional ticket provided by the
employer for private journeys of employees or their family
members will come under the purview of FBT.
Mobile phones to be taxed
Entertainment, provision of hospitality of every kind by the
employer to any person, whether by way of provision of food
or beverages or in any other manner will attract FBT.
While telephones including mobile phones will attract FBT,
expenditure on leased telephone line will be exempt.
While women and senior citizens will be happy with today's
announcements, it's a mixed bag for corporate India.
Moreover, IT, construction, pharma and transportation
companies will pay a much lower fringe benefit tax rate on
travel expenses.
But everyone else will continue to pay an effective tax of
nearly 7 per cent on travel.
Relief to senior citizens, women
Chidambaram has also fixed a loophole in his income tax
proposals, which had increased the net tax impact on senior
citizens while it reduced the tax burden on everyone else.
Giving further relief to women and senior citizens, the
income tax exemption limit for women has been raised by
another Rs 10,000 to Rs 1,35,000 and for senior citizens by
additional Rs 35,000 to Rs 1,85,000.
With this move, women earning between Rs 1,35,000 and Rs
1,50,000 will pay 10 per cent tax and income between Rs
1,50,000 and Rs 2,50,000 will attract 20 per cent.
Beyond Rs 2,50,000, it would be 30 per cent.
For senior citizens, income between Rs 1,85,000 and Rs
2,50,000 will attract 20 per cent and beyond Rs 2,50,000, it
would be 30 per cent. (With PTI inputs)
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