Deduction in terms of Long Term Infrastructure Bonds

Deduction of Rs. 20,000 for subscription

to investment in long term infrastructure bonds 

which will be notified by Central Government.  

This deduction will be over and above existing limit 

of Rs. 100,000 under section 80C, 80CCC and 

80CCD. This will be effective from Assessment 

Year 2011-2012 onwards

Deduction for contribution to Central 

Government Health Scheme (CGHS) – 

 Contribution made to HS for serving and 

retired Government servants allowed as 

deduction under section 80D within the present

limits of Rs. 15,000 and Rs. 20,000 for senior citizens.

Enhancement of weighted deduction for in-house 

scientific research and development for 

corporate covered under section 35(2AB) – 

 The quantum of claiming a weighted deduction on

the expenditure incurred on in-house scientific 

research and development by corporate has been 

raised from 150% to 200% of such expenditure.

This will be effective from Assessment Year 2011-12 onwards

Enhancement and extension of weighted deduction 

for payment made for scientific or social or

statistical research.
The quantum of claiming a weighted

deduction on the payment made to

an approved research association 

or college or university or institutions 

engaged in scientific research or research

in social science or statistical research has 

been raised from 125% to 175% times of 

such payment. This will be effective from

Assessment Year 2010-11 onwards.

Exemption of income of approved association 

engaged in research of social or scientific research - 

The income of association engaged in engaged in research 

of social or statistical research are proposed to be made 

fully exempt from tax. Presently, only a scientific research 

association enjoys exemption. This will be effective from 

Assessment Year 2010-11 onwards

Investment linked Tax Incentive scheme to

hotel industry – 

A deduction of 100% of capital expenditure 

(excluding land, goodwill, and financial instrument)

has been proposed to incentivise hotel industry for 

building and operating a new hotel of two star or 

above category anywhere in India, which starts

functioning after April1, 2010. This will be effective

from Assessment Year 2011-12 onwards

Budget 2010: Direct Tax Impact on India Inc

 

Surcharge less Taxing

The cut in surcharge for domestic companies will bring 

down their overall tax rate by 0.7725%.

Not a major reduction, but welcome relief. 

The cut in surcharge, meant to be a temporary 

levy, will be phased out once the Direct Taxes

Code kicks in.

Hike in MAT creates a ruckus

For companies under the MAT regime, 

the net increase after accounting for the 

reduced surcharge will be 2.9355%. 

Companies are grumbling, but Mr Mukherjee

says it will promote equity among corporate taxpayers.

No Evasion under garb of Gift

Unlisted companies will have to pay income 

tax on shares that they get as gifts. 

The measure is meant to counter tax 

evasion and prevent money laundering 

in the form of gifts. But it could restrict 

Indian companies from reorganising their 

ownership within a group.

Real Estate gets a breather

Pending housing and real estate projects 

can be completed in five years, instead of 

four, to claim deduction on profits. 

The finance minister is compensating the

real estate sector for a disastrous year. 

Research and Deduction

The weighted deduction for most manufacturing 

businesses on in-house research & development 

spending rises by a third to 200%. 

Measure will be an incentive to expand R&D

expenditure and promote innovation.

Blow to Foreign Companies

Non-residents who render services outside

the country will have to pay tax on their fees 

in India if these services are used here. 

The measure comes with retrospective effect 

from 1976-77. It will impact many foreign 

companies that have turnkey contracts in India.

Budget 2010-: Indirect Tax Impact on India Inc

e

Steeper course for Cars

Automakers such as Maruti, Hyundai and General 

Motors, enjoying resurgent sales after a long lull, 

as well as consumer durables, steel and cement 

firms could see demand pocked after a hike in 

central excise duty to 10% from 8%. For big cars,

the duty has been hiked to 22%.

Weaker foundation

Government imposes service tax

on construction 

of complexes, which could hobble 

demand for real estat projects. 

Profits of real estate companies 

such as DLF, Unitech and Parsvnath

that are emerging from the slowdown 

could be under pressure.

Time to quit smoking?

Excise duty on tobacco products like

cigarettes, cigars and cigarillos hiked, 

a blow for cigarette makers such as ITC 

and Godfrey Phillips. Though a big price 

hike is unlikely, the market took note with 

ITC shares falling 6.2% to Rs 232.05 on the BSE.

Running out of control

Bulk transporters such as steel, cement 

and fertiliser companies as well as iron 

ore and coal miners could see their

freight costs rise by about Rs 100 per 

tonne after movement of goods, excluding

foodgrain, by railways is saddled with service tax.

Cricket pitch lowered

Govt takes some sheen off the marketing 

prowess of sporting events such as IPL 

and Hero Honda Indian Open (golf) by 

levying a service tax on their promotion. 

The move could dampen the enthusiasm 

of advertisers & strain brands’ profits.

Air turbulence

Setback for airlines such as Jet Airways, 

Kingfisher Airlines, Air India and Indigo, 

whose ticket sales have just about begun 

humming again, as government expands 

service tax to all classes of travel on international 

and domestic flights. Earlier, only international

business class travel was taxed.