New Delhi, Feb 28: In a major relief to the industry, Finance Minister Pranab Mukherjee today lowered the surcharge on domestic companies to 5 per cent from 7.5 per cent and on foreign entities to 2 per cent from 2.5 per cent, even as it marginally raised the Minimum Alternate Tax.
 The government, however, retained the corporate tax at 30 per cent, to be paid by domestic firms.
 It increased the Minimum Alternate Tax (MAT) to 18.5 per cent from 18 per cent on book profits.
 MAT was introduced in 1987 to bring under the tax net companies that paid no or very little tax after taking advantage of the exemptions provided by the Income Tax Act.
 Presenting the Budget for 2011-12, Finance Minister Pranab Mukherjee said: "My initiative of phasing out the surcharge continues. I propose to reduce the current surcharge of 7.5 per cent on domestic companies to 5 per cent".
 "In the case of companies other than domestic companies, the existing surcharge of 2.5 per cent is proposed to be reduced to two per cent," the Budget document added.
 The minister also proposed to bring developers and units in Special Economic Zones (SEZs) under the MAT.
 "By the measure to ensure equal sharing of corporate tax liability, I propose to levy MAT on developers of the Special Economic Zones as well as units operating in the states," Mukherjee said.
 The reduction in surcharge will bring some cheer to industry which has been clamouring for a reduction in corporate tax rate to 25 per cent.
 Industry chambers have been demanding reduction in corporate tax to 25 per cent to spare the India Inc with more money to undertake big-ticket investments.
 With a view to providing incentive for Indian companies to repatriate money from offshore subsidiaries, the minister also proposed a lower rate of 15 per cent tax on dividends received by an Indian company from its foreign subsidiary.
 "I do hope this will allow funds to flow to India," he said.
 The latest proposals come two years after the government did away with surcharge on income tax during the 2009-10 Budget.
 During last year's Budget also, the government had reduced surcharge on corporate tax while hiking the rate of MAT.

Highlights

* Tax exemption limit raised to Rs 1.80 lakh, from Rs 1.60 lakh,  for general category individual tax papers.
*For senior citizens, the qualifying age reduced to 60 years;  tax exemption limit raised to Rs 2.50 lakh.
* Over 80-year old senior citizens to get Rs 5 lakh exemption limit.
* Tax surcharge for companies cut to 5 per cent, from 7.5 per cent.
* Deduction of Rs 20,000 from taxable income for investment in  long-term infra bonds extended till next fiscal.
* A simpler I-T return form 'Sugam' for small tax papers.
* Housing loan limit raised from Rs 20 lakh to Rs 25 lakh from  priority sector lending; 1 per cent interest rate subsidy for home  loans up to Rs 15 lakh.
* Service tax, peak customer duty rates retained at 10 per cent;  duty exemptions to be withdrawn on various items.
* Total expenditure estimated at Rs 12,57,729 crore for the current  fiscal; gross tax receipts at over Rs 9.3 lakh crore.
* Fiscal deficit target at 4.6 per cent for 2011-12, down  From 5.1 per cent estimated for current fiscal.
* Disinvestment target for the next fiscal at Rs 40,000 crore.  Proceeds for the current fiscal at 22,144 crore.
* RBI final guidelines for issuing new bank licences to private  players by March-end;Bill for amendments this session.
* Financial sector reforms to move forward.
* Bills on Insurance amendment,LIC and Pension Development Authority,  Banking Laws amendment, SBI subsidiaries and BIFR in the current session.
* Financial Sector Legislative Reforms Commission, to be headed  by former Supreme Court judge B Srikrishna, to complete its work  in 24 months; to overhaul financial regulations.
* New Companies Bill to be introduced in current session.
* Discussions on to further liberalise FDI policy.
* Govt to move towards direct transfer of cash subsidy for kerosene,  LPG and fertilisers.
* Constitution Amendment Bill for introduction of GST regime  in this session.
* Direct Tax Code Bill likely to be passed by Parliament next  financial year.
* Foreign investors to be allowed to directly invest in MFs;  Investment limit for FIIs in corporate bonds to go up.
* A new scheme to be introduced for refund of service tax on  lines of drawback of duties.
* A self-assessment of customs duty to be introduced for importers  and exporters to enable them to assess duty payment.
* Remuneration of anganwadi workers raised from Rs 1,500 to Rs  3,000 a month. Helpers to get Rs 1,500 from Rs 750.
* Old age pension to persons over 80 years raised from Rs 200 to Rs 500.
* Compensation of Rs 9 lakh to be given to defence and Central  paramilitary forces for permanent disability and discharge from service.
* Net loss from direct tax proposals at Rs 11,500 crore.
* Excise, customs duty proposals to provide net gain of Rs 7,300  crore; revenue gain of Rs 4,000 crore from service tax.
* Net revenue loss on account of taxes and duties will be Rs  200 crore for the year.
* Standard rate of central exercise duty maintained at 10 per  cent; no change in CENVAT rates.
* Nominal 1 per cent central excise duty on 130 items entering  the tax net. Basic food and fuel and precious stones, gold and silver  jewellery will be exempted.
* Basic customs duty on agricultural machinery reduced to 4.5  per cent from 5 per cent.
* Service tax net widened to cover hotel accommodation above Rs  1,000 per day, A/C restaurants serving liquor, some category of hospitals,  diagnostic tests.
* Service tax on air travel up to Rs 50 for domestic travel and  Rs 250 for international travel in economy class;on higher classes,  it will be 10 per cent flat.
* Some legal services to be brought under service tax net; service  by individual to another individual exempted.
* Services provided by life insurance companies in the area of  investment are also proposed to be brought into tax net, on the same  lines as ULIPs.
* Government to put in place framework for safeguard of small  borrowers in microfinance sector.
* Corruption, inflation and current account deficits identified  as major areas of concern.
* PSU banks to get Rs 6,000 crore for maintaining capital-to-risk  asset ratio norms.
* To give Rs 300 crore for promoting pulses cultivation in rain-fed  areas; another Rs 300 crore to promote farm product cultivation.
* Credit flows to farmers raised from Rs 3.75 lakh crore to Rs  4.75 lakh crore.
* Existing interest subvention scheme on short term farm loans  at 7 per cent interest to continue.
* Public Debt Management Agency Bill in the next fiscal. 
* A bill to be introduced to amend Indian Stamps Act.

Lastupdate on : Mon, 28 Feb 2011 21:30:00 Makkah time
Lastupdate on : Mon, 28 Feb 2011 18:30:00 GMT
Lastupdate on : Tue, 1 Mar 2011 00:00:00 IST