In the month of February 2007, the budget was introduced by P Chidambaram, the 29th Finance Minister of India. The main features like those of earlier ones have both positive and negative points. The tax rates for domestic and foreign companies have been maintained at the existing level of 30 to 40% respectively, but the dividend distribution tax has been hiked from 12.5 to 15%. The budget proposed to remove the surcharge on firms and companies if taxable income is Rs. 1 cr or less. This article discusses all the issues of this current budget.

On the last day of February, 2007, P Chidambaram, India's 29th Finance Minister, presented UPA Government's fourth budget and his sixth. The present Finance Minister will be remembered by the Indian tax-payers for a long time as he never missed an opportunity either to introduce new taxes or alter the existing tax rates or broaden the tax base. In fact, the biggest tax reforms have come in the last 30 months. Indeed, it was he who introduced four new taxes—Minimum Alternate Tax (MAT) in 1997, Securities Transaction Tax (STT) in 2004, Banking Cash Transaction Tax (BCTT) in and Fringe Benefits Tax (FBT) in 2005.

This year budget's too, like earlier ones, has both positive and negative features. Though the basic tax rates for both the corporate and non-corporate assessees have not been changed, several proposals in the budget will enhance the overall tax burden. For non-corporate assessees, the basic exemption limit has been hiked by Rs. 10,000 and it will give a tax relief to the assessees of Rs. 1,000. However, the increase in the education cess by 1% will nullify a part or whole of the gain. If the tax-payer's taxable income exceeds Rs. 5,10,000, the tax burden will get increased. With this hike, the effective rate will be 33.99%. This cess will be levied not only on the tax payable, but also on all products and services covered under excise, custom and service tax. As such, the impact is widespread though the rate appears too small.

The Accounting World Magazine, Budget 2007, P Chidambaram, Tax Reforms, Securities Transaction Tax, Banking Cash Transaction Tax, BCTT, Fringe Benefits Tax, Foreign Companies, Indian Companies, Information Technology, IT, Gross Domestic Product, GDP, service tax, Finance Act, Minimum Alternate Tax, Indian Tax System.