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Dividend distribution tax hiked, corporate tax rate maintained

Dividend distribution tax hiked, corporate tax rate maintained
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First Published: Wed, Feb 28 2007. 02 22 PM IST
Updated: Wed, Feb 28 2007. 02 22 PM IST
New Delhi: The government has proposed no major relief to the corporate sector in the budget for financial year 2007-08, while the increase in the dividend distribution tax has came as a negative surprise. 
As part of his budget presentation, finance minister P Chidambaram maintained the corporate tax rates to previous levels. But the widely held expectation that surcharge on corporate tax could be done away with was only partly realised. Surcharge was removed only for small and medium enterprises having an income of Rs1 crore or less.
The minister handed another benefit to SMEs in the form of service tax relief. Small tax providers providing service up to Rs8 lakh have been exempt from tax.
On the other hand, the minister raised the dividend distribution tax from 12.5% to 15%, a move to which the market reacted sharply.
But in what came as a relief to the stock market, the rate of securities transaction tax was kept unchanged.
In another key proposal, education cess on service tax has been increased from 2% to 3%.
The government also tweaked the fringe benefit tax regime, bringing in ESOPs under it, while free distribution items and samples were exempt.
In move directed at individual sectors, excise duty on cement reduced from Rs 400 per tonne to Rs 350 per tonne for cement bags sold at Rs 190 per bag at retail market. Those sold above Rs 190 will attract excise duty of Rs 600 per tonne.
Excise on cigarettes have increased by 5%, but duty on pan masala without tobacco as mouth freshners reduced from 66 % to 45 %
In what came as a surprise, MAT was extended to the IT sector.
Also, the benefits of investment in venture capital funds confined to IT, bio-technology, nano-technology, seed research, dairy among some others.
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First Published: Wed, Feb 28 2007. 02 22 PM IST