1) General
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Substantial reduction in rates of taxation of individuals whereby tax relief of Rs 24,000 is given to each taxpayer having income upto Rs 250,000.
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No change in taxation of capital gains.
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NRIs having income other than capital gain shall be required to claim refund of tax deducted at source.
Income Tax Rates
| Existing | Proposed | ||
| Individual Income | Rate | Individual Income | Rate |
| Upto Rs 50,000 | Nil | Upto Rs 100,000 | Nil |
| Rs 50,000 to Rs 60,000 | 10.00% of the amount by which the income exceeds Rs. 50,000 | Rs 100,000 to Rs 150,000 | 10.00% of the amount by which the income exceeds Rs 100,000 |
| Rs 60,000 to Rs 150,000 | Rs 1,000 plus 20.00% of the amount by which the income exceeds Rs 60,000 | Rs 150,000 to Rs. 250,000 | Rs 5,000 plus 20.00% of the amount by which the income exceeds Rs 150,000/- |
| Above Rs 150,000 | Rs 19,000 plus 30.00% of the amount by which income exceeds Rs 150,000 | Above Rs 250,000 | Rs 25,000 plus 30.00% of the amount by which income exceeds Rs 250,000 |
| Surcharge @ 10.00% (If income exceeds Rs 850,000) | Surcharge @ 10.00% (If income exceeds Rs.1,000,000) | ||
No change in education cess i.e. education cess is 2.00% of total tax payable is levied.
2) Interest on NRE & FCNR Account
The Finance Act 2004, had withdrawn tax exemption on NRE/FCNR deposit w.e.f. April 1, 2005. However, The Finance Bill, 2005, has specifically withdrawn the provision and exemption is restored back. Thus, now Interest on NRE/FCNR deposit is exempt from tax.
3) Tax Deducted at Source
There is no change in the TDS Rates. The rates at which taxes are required to be deducted are as under:
| Rates for TDS | Rate | Surcharge | Cess | Total |
| 1) Capital Gains on Equity shares and equity oriented Mutual fund sold on Recognised Stock Exchange: |
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| i) Short term | 10.00% | 10.00% | 2.00% | 11.22% |
| ii) Long Term | NIL | NIL | NIL | NIL |
| 2) Capital Gain on Mutual Fund and equity shares other than 1) above |
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| Short Term | 30.00% | 10.00% | 2.00% | 33.66% |
| Long Term | 10.00% | 10.00% | 2.00% | 11.22% |
| 3) Capital gain on Other Assets | ||||
| i) Short term | 30.00% | 10.00% | 2.00% | 33.66% |
| ii) Long Term | 20.00% | 10.00% | 2.00% | 22.44% |
| 4) Interest on Bank Deposits | 30.00% | 10.00% | 2.00% | 33.66% |
4) Securities Transaction Tax (STT)
| Nature Of Transaction | Current Rates |
Proposed Rates |
| Equity shares transaction in a Recognised Stock Exchange: - | ||
| 1. With Delivery | ||
| Purchaser | ||
| Seller | 0.075% | 0.100% |
| 2. Without Delivery | 0.075% | 0.100% |
| Seller | ||
| 0.015% | 0.020% | |
| Derivative transactions in a Recognised Stock Exchange | ||
| Seller | ||
| 0.010% | 0.013% | |
| Sale of Units of Equity Oriented Mutual Fund | ||
| Seller | 0.150% | 0.200% |
5) Zero Coupon Bond
The financial instrument, Zero Coupon Bond shall be treated as a capital asset and shall be liable for capital gains tax at prescribed rates i.e.20% in respect of long term capital gains and 30% in respect of short term capital gains.
6) Trading in Derivatives
Trading in derivatives as defined in Securities Contracts (Regulation) Act, 1956 carried out on recognised Stock Exchange will not be considered as speculative business. It shall be treated as capital gains transaction.
7) Rebate/Deduction
The provisions for deduction from tax payable in respect of investments/contributions in specified schemes/plan like LIC, ULIP, bonds, mutual funds etc is eliminated. However, such investments up to Rs 100,000 shall be eligible as deduction from the gross total income.
NOTE: DISCLAIMER:
The above proposals are effective only after The Finance Bill, 2005 is passed by the Indian parliament and assented by the President of India. Once this procedure is completed, the proposals shall be effective w.e.f. April 1, 2005 (i.e. for Financial Year: 2005-06 and Assessment Year : 2006-07) .
This document should not be considered as substitute for specialized professional advice and expert guidance may be sort before acting upon.
The Budget highlights for Taxation have been contributed by nritaxservices.com
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