Budget 2005-06:Corporate tax rate slashed to 30 per cent
New Delhi: The Finance Minister, P. Chidamabaram, has aligned the corporate income-tax rate for domestic companies to the highest marginal personal income-tax rate of 30 per cent. A surcharge of 10 per cent would, however, be applicable on domestic companies.

The basic rate of corporate income-tax for domestic companies was hitherto pegged at 35 per cent. No change has now been proposed in the Union Budget for 2005-06 on the tax regime for foreign companies under Income-Tax Act.

Since corporate income-tax rate, the surcharge thereon, and depreciation are inter-linked, the Government has now pegged the rate of depreciation for general machinery and plant at 15 per cent. The initial depreciation rate has, however, been increased to 20 per cent.

In his Budget speech, the Finance Minister said that the corporate sector would find the proposed tax structure as "fair", as it would encourage new investment and ensure equity among all sections of corporate taxpayers.

Corporates paying minimum alternate tax would also gain from the Union Budget for 2005-06, as they can now claim credit under Section 115JB of the Income-Tax Act.

To encourage technological upgradation, the Finance Bill also proposes to reduce the withholding tax on technical services from 20 per cent to 10 per cent.

Chidambaram also announced the removal of requirement of 10 per cent increase in installed capacity for availing of the benefit of initial depreciation.
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Budget 2005-06: India Inc. to save Rs.9,200 crore from duty cuts
New Delhi: Oil companies stand to save Rs5,200 crore from the cut in the import duty on crude from 10 per cent to five per cent, though on account of the under-recovery on the prices of petrol and diesel they will continue to take a hit of Rs475 crore a month.

The proposed reduction in the peak customs duty rate for non-agricultural products from 20 per cent to 15 per cent is likely to reduce the cost of imports of Indian companies by Rs4,000 crore in 2005-2006. Of this, the saving in imports duty on raw materials will be Rs3,610 crore and on capital goods imports it will be around Rs390 crore.

The Indian Oil Company (IOC), which imported crude worth Rs36,170 crore in 2003-2004, stands to save around Rs1,800 crore. Reliance Industries will save Rs1,700 crore, followed by HPCL at Rs466 crore, MRPL at Rs381 crore, Kochi Refineries at Rs307 crore, Chennai Petroleum at Rs265 crore and BPCL at Rs242 crore.

Trading companies will be the largest gainers from the duty cuts and the gains are estimated at around Rs453 crore. Diamond and jewellery exporters stand to gain around Rs292 crore, steel firms around Rs257 crore, pharmaceuticals Rs226 crore, fertilisers Rs213 crore and IT companies Rs157 crore.

The Steel Authority of India (SAIL) is the third major gainer with Rs122 crore saving. SAIL imported raw material worth Rs2,430 crore in 2003-2004.
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