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CII suggestions to fine-tune Finance Bill provisions

BS Corporate Bureau

The Confederation of Indian Industry, in its post-budget memorandum, has identified measures to fine-tune a set of provisions in the Finance Bill, 2002, before their enactment.

These include provisions concerning taxation, dividend tax, section 10A and 10B benefits, minimum alternate tax, rates of depreciation and non-compete fees.

CII feels reduction in the depreciation rate to 60 per cent will impact investments. The industry chamber has said depreciation allowance should continue at the existing level of 100 per cent to promote alternative energy sources.

CII has also emphasised that the reduction in the fiscal incentives available to exporters under Section 10A and 10B should be restricted to the current financial year only.

Suggesting an alternative for the taxation on dividends, the industry chamber has said companies can continue with the 10 per cent tax on dividend and in addition, they can withhold tax at 20 per cent of the dividend and remit the balance to shareholders.

Mutual funds should not be subjected to the withholding tax to avoid a cascading effect, CII has said adding that foreign institutional investors should be taxed at a flat rate of 10 per cent by way of the withholding tax.

The industry chamber has also said the reduction in rebate for individuals with a total income of more than Rs 1,50,000 and up to Rs 5,00,000 to 10 per cent will act as a disincentive for saving.

This will have an adverse impact on the availability of long-term capital that comes through the payment of life insurance premiums, investment in infrastructure bonds, Public Provident Funds, etc.

CII feels the rebates available to individuals under Section 88B should be restored without any modification.

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