Budget 2011

President present a tax reforming budget to the parliament last evening. Major changes in tax structure can classify as follows.

* Tax free allowance increased from 300,000 to 500,000 and expand and revised the personal tax slabs from 400,000 to 500,000.

* Tax deducted from employment income under the PAYE scheme will be treated as final.The facility of applying for directions or refunds will not be available in relation to the employment income. Accordingly, the requirement of filling returns by them will not arise

* The payments to Directors etc., referred to in section 117 will also be subject to WHT tax at 16%, if such payments received from an employer exceed Rs.25, 000/- per month. Otherwise remain unchanged.

*The sum paid from a Provident Fund referred to in section 35(2) (d) and (e) of section 35 of the Act, will be excluded from the liability.

* The existing files of employees will be closed, if tax on other sources is also treated as final.

* Expenses on listing a company will be deductible subject to a limit of 1% of the value of the Initial Public Offer.

* The present restriction of 50% will be reduced to 25%. Accordingly, 75% of advertisement expenses will be allowed.

*deduction of expenses on foreign travel will be allowed if incurred in the production of income maximum subject to 2% of previous year total statutory income.

* The present WHT applicable on specified fees will be discontinued with effect from april 01. 2011.

* The members of AAT will be recognized as authorized representatives for the purposes of the Inland Revenue Act.

* The present 20% rate will be reduced to 12%. Accordingly, there will be only one rate applicable other than the Zero Rate.

* The present registration threshold of the normal VAT will remain unchanged.

* The present restriction of 85% of the output tax will be extended to 100%, in respect of any tax invoice or custom declaration issued on or after January 1, 2011.

* There is no upper limit of turnover for the application optional VAT rates. However, the option is available to register for normal VAT at any stage.

*The present NBT rate of 3% will be reduced to 2%.

* The present threshold of Rs 650,000 per quarter will be reduced to Rs 500,000/- per quarter.

* ESE The present threshold of Rs. 7. 5 mn per Quarter will be increased to Rs 25 mn.

* Debits tax will be removed with effect April 1, 2011.

* SRL on income tax will be removed with effect from April 1, 2011.

* The TT will be abolished with effect from 1.1.2011.

* The present share transaction levy rate of 0.2% will be increased to 0.3% with effect from January 1, 2011.