Corporates, who will now effectively pay a tax of 33 per cent, were expecting up to three per cent relief.

However, surcharge on all companies with taxable income below Rs 1 crore (Rs 10 million) has been dropped, which would benefit an estimated 12 million firms.

The tax paid by India Inc includes 30 per cent tax on income, 10 per cent surcharge and 3 per cent education cess and the segment with a proposed collection of Rs 168,401 crore (Rs 1684.01 billion) would account for more than one-third of total revenue receipts of the government in 2007-08.

The surcharge will continue to be levied at 10 per cent rate on tax on fringe benefits irrespective of the amount of fringe benefits. Rather companies especially in the IT and finance sector, would have to pay FBT on stock options offered to the employees as well.

In case of dividends distributed by mutual funds, the dividend tax has been raised to 25 per cent on all investors.

However, the companies engaged in gas distribution and navigation channels in sea would get tax relief, as Chidambaram has proposed to extend the tax holiday to them presented available to infrastructure sector.