Exhaustive and upbeat wishlists were put forward by chambers and industry associations. Though the pre-Budget recommendations of significant representative forums were wide and appealed to various sectors, most of them have not caught the attention of mandarins in North Block.

The overall expectation on the direct tax side was moderate tax rates accompanied by a simpler and less complicated tax regime.

Heading the industry wishlist was continuation of fiscal sops for the IT industry -- the tax holiday window for Software Technology Parks of India nearing its end in a couple of years. Similarly, hopes were pinned on extension of tax holiday to bio-technology and the pharma sector. Chambers have been advocating for putting infrastructure development on the priority list for 2007 Budget. Not to lose sight, senior citizens rallied around the FM for enhanced breaks whilst the rest hoped for moderation of tax rates. Proposals for rationalisation of new FBT regime, status quo in minimum alternate tax and dividend distribution tax rates were other big ticket desires.

Overall, Budget 2007 has the flavour of the FM's commitment to make it a non-event with unstinted focus on strengthening administrative reforms and facilitate voluntary compliance. The resounding success of electronic filing of corporate tax returns has resulted in it being granted mandatory status along with the FM's encouragement to banks to implement e-payments.

On the personal tax front, some rejigging in the slab rates will provide marginal relief to all individual taxpayers in low slab rates. Increase in the limit of deduction in respect of medical insurance premium (INR 20,000 for senior citizens while for others to INR 15,000) would provide further relief to the common man. Whilst the Budget has left the corporate tax rate untouched, there has been little tweaking in the surcharge through abolition of surcharge for firms and companies having taxable income of 10 million or less. Last but not the least, the education cess has increased from current 2 per cent to 3 per cent, thereby marginally impacting high slab rate taxpayers.

Although Budget 2007 fulfils the desire of the corporate world with the status quo MAT rate, it burdens firms declaring dividends with an additional 2.5 per cent DDT, thereby pushing the effective rate to almost 17 per cent. In addition, the DDT on dividends distributed by the money market and liquid funds will be 25 per cent. Another development that is not likely to find favour is the extension of the FBT regime to cover employee stock option plans.

The zeal of the IT / ITES sector is dampened with no announcement on the extension of tax holiday beyond March 2009, the sunset date. Further, to make matters worse, MAT will be levied at 11.33 per cent of book profits. An anticipated amendment on "reconstruction and splitting up" in the tax holiday provisions applicable to special economic zones wipes out the possibility of STPIs reviving any tax holiday beyond March 2009.

We seem to be going in the reverse direction so far as tax neutral business reorganisation provisions are concerned. On the one hand, the captains of industry were persuading the government to extend the tax holiday benefit to the services sector; on the other hand, the Budget proposals suggest that the infrastructure sector would be disentitled to unexpired tax holiday in the event there is business reorganisation. This is a retrogade step.

Several positive aspects of the Budget suggest the Government's resolve to encourage development of infrastructure, particularly cross-country natural gas distribution networks, including integrated pipeline and storage facilities and navigation channels. These have now been included for the 10-year tax holiday benefit. Finally, the FM seems to have obliged the sunrise sector so far as 150 per cent weighted deduction for research and development is concerned by extending it up to March 31, 2012. There is reason for a portion of the hospitality industry to cheer since a 5-year tax holiday has been granted to budget (non five-star) hotels and convention centres located in the National Capital Region and commencing operations between April 1, 2007, and March 31, 2010.

The FM has proposed amendments to activate the Settlement Commission, a body which was lying dormant! Hopefully, this would be an added avenue to address the problem of drawing tax controversy. Amongst various changes, the most welcoming one is that the Commission has to pass an order within a time-frame of nine months. Under the new scheme only disputes arising in the course of assessment proceedings would be a subject matter of settlement. Further, this is once in lifetime opportunity for a tax payer, thereby significantly curtailing the functions.

The FM seems to be convinced that the banking cash transaction tax is an effective anti tax evasion measure by continuing with it and promising to relook at it next year. Even in this Budget, some relief has been granted, which includes increase in exemption limit on cash withdrawals for individuals and HUFs upto INR 50,000 and full exemption to central and state governments from levy of BCTT.

A glance at the proposals suggests no radical changes on the taxation front; it seeks to lay greater emphasis in enhancing efficiency and productivity of the tax administration. Several administrative goals have been laid out, including expanding the coverage of the Annual Information Report, ease of granting tax refunds, creation of large taxpayers units, etc. Further, the announcement of a new IT code later this year will be anxiously awaited.