This refers to the Union Budget 2010 which was presented by the Finance Minister Pranab Mukharjee in the Parliament recently. The Budget seeks to align important parameters like curtailing fiscal deficit, containing inflation and accelerating economic growth. The Budget has few goodies for the corporate world apart from some surprising measures to increase tax collections. From the Corporate Income Tax perspective, key amendments proposed in the Union Budget 2010 are briefly discussed here.
Reducing tax rates: The rate of surcharge on Indian Companies is proposed to be reduced from 10% to 7.5% but this provides only marginal relief.  The additional surcharge in the form Education Cess and Higher Secondary Education Cess on all Companies continues and was expected to be done away with.  The rate of Minimum Alternate Tax (MAT) on book profits which was increased by 5 percent in the last budget has been once again increased by 3% resulting in the basic rate being increased to 18% as against 10% two years back. 
Non-Resident Income scope: In an attempt to override court rulings, the provisions relating to taxability and deemed accrual of ‘fees for technical services’ for non-residents is proposed to be amended retrospectively to tax payments for services to non-residents irrespective of the place of rendering or utilization of services. 
Scientific Research and Development Expenses: The proposed increase in weighted deduction for expenses incurred on recognized in-house Scientific Research and Development from existing 150% to 200% and for payments to specified Bodies or Institutions from existing 125% to 175% would help promote institutionalized research and development across sectors. This will particularly benefit the Pharma and Automobile Sector.  It would have been welcome move if the sunset date for these weighted deduction benefits had also been extended.
Withholding taxes and deduction linked thereto: The thresholds for deducting tax at source have been revised to a more realistic basis. An expense would now be tax deductible so long as the underlying taxes deducted at source in a financial year are deposited on or before the relevant due date for filing of the return of income.  It would be more beneficial if such provision would have been retrospective in nature.  This is a welcome provision though the corresponding interest levied on belated payments is to be enhanced to 18% p.a. as against the current 12% p.a.
Income tax holidays: To promote tourism, an investment linked incentive of 100% of capital expenditure is being extended to any hotel of two star and above categories across India.  With respect to tax holiday for housing projects, the date for completion of projects approved after 1 April 2005 is being extended by one year and the restriction on usage of area for commercial establishments is being eased out. Also the anomalies in computing the tax holiday for SEZ units qua the unit and business are proposed to be removed by amending the relevant formula and rightly so, this amendment is retrospective in nature.  All these are very welcome initiatives.  However, the sunset date Tax Holiday for exports from STP and EOU units has not been extended in this Budget and was much awaited by the IT/ ITes Industry. 
Other provisions: To reduce the compliance burden on Small and Medium Enterprises (SMEs), the threshold limits for tax audit are to be enhanced to Rs. 60 lakhs (current ceiling of Rs 40 lakhs) for business undertakings and Rs. 15 lakhs (current ceiling of Rs 10 lakhs) in cases of professionals.  Similarly, the provisions relating to tax neutral conversion of an Indian Company into LLP are welcome provisions and will benefit the SMEs greatly.
Summary:  The Indian stock market and corporate Inc. have received the budget with mix responses. The confirmation that the Direct Taxes Code and Goods and Service Tax road map on the anvil are comforting factors in the road to simplification and progress.  Thus, in general the Union Budget 2010 can said to be for the Entrepreneurs and the Investors, but much more could have been done and as they say…”yeh dil maange more”!.    
 The Budget came with more problems and sufferings. It has not brought any relief to  the common man. With the hue and cry from the opposition the FM should re-consider the Budget.

(Irshaad Ahmad Bhatt is MCA Student, SSM College Of Engineering, Pattan. Feedback at: ibhat8223@gmail.com)

Lastupdate on : Thu, 4 Mar 2010 21:30:00 Makkah time
Lastupdate on : Thu, 4 Mar 2010 18:30:00 GMT
Lastupdate on : Fri, 5 Mar 2010 00:00:00 IST