Indian Government Passes Finance Bill

by Lorys Charalambous, for LawAndTax-News.com, Cyprus

04 May 2005

It emerged this week that India's parliament has passed the 2005-06 Financial Bill, albeit with several alterations.

According to reports in the national media on Monday, the proposed 0.1% tax on the withdrawal from banks of amounts of more than Rs10,000 has been significantly amended, with withdrawals from savings accounts now totally exempted. However, withdrawals from current accounts and term deposits will still attract the tax.

It was additionally reported that the income tax exemption for women has been increased by Rs10,000, and for senior citizens by Rs35,000.

The most signficant alteration to the Finance Bill, however, was the dilution of several key provisions of the Fringe Benefit Tax, although it was decided that the overall rate would remain the same at 30%. The measure was announced in the February budget as a way to tax the 'perks' provided by private companies to their employees.

Responding to pressure from the private sector, which had argued that the FBT's reach was too broad, Finance Minister P. Chidambaram announced on Monday that several categories of what he referred to as "legitimate business expense", including advertising costs, would be exempted from the controversial levy.

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