Chidambaram has also clarified that the additional exemption of Rs1,00,000 on investments in specified instruments need not come from the income chargeable to tax. The Finance Bill had earlier proposed investment in the specified savings instrument would be exempt from tax up to the Rs1 lakh limit, provided it was made out of the assessee's "income chargeable to tax."

Justifying the imposition of the BCTT to create a tax-trail for large cash transactions, Chidambaram said that the banking system was increasingly being used for money laundering. "There is a misconception that money put in a bank is white money and is not tainted money. The banking system is, in fact, a well-known instrument of laundering money. I have massive evidence of the banking system used for laundering," he said.

Chidambaram said that while the tax trail would be created, the tax authorities would intervene only when the withdrawals amounts were really large and recurrent.

On FBT, he said that in all but four categories he had decreased the tax incidence from the proposed 50 per cent to 20 per cent. "If every company gives every benefit to every employee, the effective tax rate would go up by 1-1.5 per cent," he said. The effective corporate tax rate now works to around 20 per cent on the tax rate of 33 per cent, he pointed out.

The Finance Bill 2005 was passed by the Lok Sabha through a voice vote.

Highlights of new taxes:

• The taxable value on the use of phones, other than leased lines, doubled to 20 per cent.
  
• Companies given a respite on spending on sales promotion including publicity
  
• Benefits extended to software and pharmaceutical companies by reducing the taxable value on conveyance and boarding lodging to 5 per cent as against 20 per cent for the other sectors.
  
• At present, the effective rate of tax on companies is estimated at 20-21 per cent.
  
• Withdrawals from savings bank accounts would be exempted from the cash withdrawal tax
  
• Individuals and Hindu Undivided Family withdrawing above Rs25,000 in a day from a current account would be required to pay the 0.1 per cent tax.
  
• Withdrawals from term deposits will also attract the cash withdrawal tax.
  
• Corporates withdrawing over Rs1 lakh a day would be required to pay the 0.1 per cent tax.
  
• Enhanced tax exemption limit for women by another Rs10,000 to Rs1,35,000
  
• Enhanced tax exemption limit for senior citizens to Rs1,85,000 from Rs1,50,000
  
• Mobile handset manufacturers to be exempted from the payment of 4 per cent countervailing duty on components for mobile phone manufacturing.
  
• Specific excise duty on molasses, earlier raised from Rs500 a tonne to Rs 1,000 a tonne, now reduced to Rs750 per tonne.
  
• Optional excise duty on nylon tyres cut to 8 per cent
  
• All parts of computers, including laptops, CPUs and mouse, to be covered under 7 per cent import duty
  
• CVD on nets for tuna fishing reduced from 16 per cent to 8 per cent
  
• Premium paid for farm insurance to be excluded from payment of service tax
  
• Sales promotion expenses, other than those on ads in the print or electronic media or on buses and trains, press conferences, business convention, participation and fairs to be taxed.
  
• Sponsorship of sports and other events organised by the government or trade association, spending on direct mails and putting up kiosks or billboards would not be taxed and all payments to ad agencies to be exempted.
  
• Expenses on meeting statutory obligations or for mitigating occupational hazards excluded from FBT.
  
• Expenses on hospitality not to include payment for food and beverages provided by employers in the office or in a factory or payment though food vouchers.
  
• Expenditure on conferences to include expenses on tour and travel, including foreign travel.
  
• Any free or concessional ticket provided by employers for private journeys of employees or their family members to be taxed.
  
• Any contribution to an approved superannuation fund for employees to be taxed as fringe benefit.
  
• Companies required to separate returns with a tax audit certificate,
  
• Institute of Charted Accountants of India to issue accounting standards soon.

Cash withdrawal tax:

• No cash withdrawal tax on savings bank accounts Over Rs25,000 withdrawn by individuals or HUF in a day from current account to be subjected to 0.1 per cent tax; for others on Rs1 lakh withdrawn during a day.
  
• Tax to be levied on withdrawals from all banks instead of only scheduled banks proposed earlier
  
• Withdrawals from term deposits to also attract the cash withdrawal tax.

Income tax exemption limits raised:

• For women: Exemption limit raised to Rs1.35 lakh, up from Rs1.25 lakh.
  Income tax for women for annual incomes between:
  

  Rs1.35 lakh to Rs1.50 lakh	10 per cent
  Rs1.5 lakh to Rs2.5 lakh	20 per cent.
  Rs2.5 lakh upwards	30 per cent.

  
  
• For senior citizens: Exemption limit raised to Rs1.85 lakh, up from Rs1.5 lakh
  Income tax for senior citizens for annual incomes between:
  

  Rs1.85-2.5 lakh	20 per cent
  Rs2,50,000, upwards	30 per cent.

  
  

Fringe benefits for sectors:

• Hotels: Fringe benefit on hospitality to be calculated at 5 per cent instead of 20 per cent for other sectors.
  
• Construction: Liable to pay fringe benefit tax on 5 per cent on conveyance, tours and travel spending instead of 20 per cent for the others.
  
• Pharmaceuticals: To pay concessional FBT on 5 per cent of the spending on conveyance, tours and travel, use of hotel, boarding and lodging as against 20 per cent for other sectors
  
• Road transport: Those engaged in carriage of goods and passengers by motor cars to pay FBT on 5 per cent of the spending on repairs, maintenance, running (including fuel) and the depreciation thereon
  
• Airlines: not required to pay FBT on repairs, maintenance, running (including fuel) and the depreciation thereon
  
• Software: to pay concessional FBT on 5 per cent of the spending on conveyance, tours and travel, use of hotel, boarding and lodging as against 20 per cent for other sectors

Other tax changes:

• All parts of computers, including laptops and central processing units, to be subjected to 7 per cent import duty
  
• No countervailing customs duty on components for mobile phone manufacturing
  
• Excise duty for molasses cut to Rs750 per tonne
  
• Optional excise duty on nylon tyres cut to 8 per cent
  
• Countervailing duty on nets for tuna fishing halved to 8 per cent