LT Gains on Equities:
Long-term capital gains arising from transfer of shares purchased through a recognised stock exchange, on or after 1.3.03 but before 29.2.04 are exempt from income tax. This date of closure of the benefit has been extended by 3 years. This exemption is restricted to only those shares figuring in the BSE-500 index as on 1.3.03. If during the course of the year, any of these shares are replaced with another stock in the index, investors who had purchased the share prior to its replacement will continue to enjoy the benefit.

The benefit is also extended to shares of companies making Initial Public Offers during the year. Remarks : It is the blatant need of the day to support the stock market and therefore, this extension was already known to the market players. However, the period of 3 years was a pleasant surprise. I wish, Mr. Jaswant Singh had extended the benefit even to the equity-based MF schemes. These are after all pass-through vehicles and for all practical purposes represent the collective investments of the investors in equities.

LT Gains on Agricultural Land:
Agricultural land situated within 8 kilometers of the local limits of any municipality, notified area committee, town committee or a cantonment board and which has a population of not less than 10,000 is considered as a capital asset. Consequently, sales or transfers made of such lands situated within the limits would attract tax as capital gains. It is unreasonable to slap the capital gains tax arising out of compulsory acquisition of such agricultural land. Thankfully, it has now been made tax-free.

I wish the same tenet is extended to all compulsory acquisitions.

Central Stamp Duty:
Thankfully, for the first time in history, the authorities have conceded that the stamp duties levied on various transactions are heavy. Mr. Jaswant Singh has cut the central stamp duty by as much as 50 per cent. This is a welcome measure, as long as it is also followed by the States and extended to all activities, including real estate transactions, across the board. The current amendment has very little impact on the common man since this reduction is effectively to transfers of share and debentures in physical form.

Customs Duty:
Passengers, including foreign nationals, normally residing in India, who go abroad on a short trip of more than 3 days, can import as accompanying baggage new articles up to Rs. 12,000 (except some specified articles such as fire arms) free of duty. Goods in excess of the limits attract 50 per cent ad valorem duty, without any surcharge, additional or special additional duty.

These rates had been in existence from a long time and needed an urgent change. Mr. Jaswant Singh has increased the allowance to Rs. 25,000 and simultaneously reduced the rate of duty from 50 per cent to 40 per cent, effective from today, the 3rd Feb ’04.

Business Process Outsourcing:
India is emerging as big market for the foreign companies to outsource some of their routine activities. There was uncertainty and controversy regarding tax on the service arising out of such activities that had become a matter of concern to all and sundry. In this area, it appears that the authorities have succumbed to the pressure brought by the outraged IT industry and have done away with the requirement. However, we will have to wait for the fine print to understand the exact nature of the amendment.

Service Tax:
This is a procedural change effected by allowing a provider of more than one service to adopt single registration and single return. The following decisions were taken before presenting the Interim Budget. Possibly, these executive decisions were kept out the Mini Budget because these were tax-related ones.

Employees with Salary under Rs. 1.5 lakh:

Returns not Required to be filed by employees having salary (after taking into account exemption u/s 16 in respect of standard deduction and professional tax) up to Rs 1.5 lakh p.a. provided, i) the entire income-tax payable should have been deducted by the employer and ii) The employee does not have any other taxable income. The salary certificate by the employer will be treated as a return filed by the said salaried employee. 1-by-6 Scheme not Applicable to Pensioners All individuals passing one or more of the 6 specified tests are required to file tax returns, even if their total income is under the tax threshold of Rs. 50,000. Now, all pensioners fulfilling one or more of the 1-by-6 criteria, having income below the exemption threshold of Rs 50,000 would not be required to file the income-tax returns for FY 2003-04 and onwards. If however, the pensioner, receives income from all sources taken together exceeding the sum of Rs 50,000 in a financial year, then he will be required to file his return irrespective of whether he fulfills one or more of the economic indicators or not. Perk of Housing Loan At present, as per Rule 3(7i) the value of the benefit to the assessee resulting from the provision of interest-free or confessional loan made available to the employee or any member of his household by the employer or any person on his behalf shall be determined as the sum equal to the simple interest computed @10 per cent p.a., in respect of loans for house and conveyance and @13 per cent p.a., for other loans on the maximum outstanding monthly balance as reduced by the interest, if any, actually paid by him or any such member of his household. These rates were fixed way back in April ’01 and became unrealistic with passage of time. To bring the rates in line with market-determined rates, the corresponding rates used by SBI will be used from 1.4.04 onwards.

To Conclude:
A time has come when every government irrespective of its party or politics is committed to continue the reform process. The incumbent government only knows this too well. Yesterday was an interim budget where those changes that required amendments to the law could not be carried out. In spite of this, the FM specifically stated that he would have very much liked to change the existing rules regarding standard deduction for salaried employees, family pension and even the general exemption limit for taxability. So we can all look forward to beneficial amendments being carried out in these areas sooner than later.

The author is an Investment Consultant