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Finance Minister's Budget Speech - Part 8

Part 7

162. To help revive investor-interest in primary issues I propose to exempt long-term capital gains arising from the sale of securities and Units if such gains are reinvested in primary issues of shares of public companies.

163. Sir, the tax incentives in the form of tax holidays for infrastructure facilities are proposed to be further rationalized and enlarged. For the core sectors of infrastructure namely, roads, highways, rail system, water treatment and supply, irrigation, sanitation and solid waste management systems, I now propose a ten-year tax holiday which may be availed of during the initial twenty years. In the case of airports, ports, inland ports and waterways, industrial parks and generation and distribution of power, which also become commercially viable only in the long run, a tax holiday of ten years is being proposed to be availed of during the initial fifteen years. The period of commencement of business for power and industrial parks is also being extended up to 31, March 2006.

164. The five-year tax holiday and 30 per cent deduction for next five years was available to the telecommunications sector till 31, March 2000. I propose to reintroduce this concession retrospectively for the units commencing their operations on or before 31, March 2003. These concessions will also be extended to internet service providers and broadband networks.

165. Sir, in addition to the tax holiday proposed for development of infrastructure, tax incentives have also been provided for the investors providing long-term finance or investing in the equity capital of the enterprises engaged in infrastructure facility. Any income by way of interest, dividends or long-term capital gains from such investments is fully exempt. I propose to extend this concession to guarantee commissions and credit enhancement fees earned by financial institutions from infrastructure enterprises. Co-operative Banks will also be eligible for exemption of their income from investments in approved infrastructure facilities.

166. To be globally competitive, our companies need to increase their investment and expenditure for Research and Development. Currently, a weighted deduction of 150 per cent of the expenditure on in-house research and development in certain areas is allowed to companies. Sir, I propose to extend this weighted deduction to biotechnology as well for clinical trials, filing patents and obtaining regulatory approvals. I also propose that the entire amount paid to specified projects under the India Millennium Mission, 2020 will be eligible for 125 per cent weighted deduction.

167. To encourage development of industrial infrastructure, I had provided 100 per cent deduction of export profits for a period of ten years to units operating in the Special Economic Zones last year. I now propose to give further tax incentives for the development of these zones. The concessions available for infrastructure by way of a 10-year tax holiday will be available to the developers of Special Economic Zones on the same lines as developers of industrial parks. The income of investors making long term investment for the development of SEZs will also be exempt.

168. The storage of food grains and their transportation are our major concern. Sir, I propose to provide a tax holiday for five years and 30 per cent deduction of profits for the next five years to the enterprises engaged in the integrated business of handling, transportation and storage of food-grains.

169. Sir, for promoting the industry that provides the cup that cheers, I propose to increase the development allowance available for tea from 20 per cent to 40 per cent. This additional allowance will be used only for re-plantation, rejuvenation, and modernization of tea plantations and processing facilities.

170. There has been a long-standing demand from the Shipping Industry that the rate of depreciation available in respect of ships and inland water vessels may be increased. I propose to increase this rate of depreciation to 25 per cent.

171. To encourage investments in weaving, processing and garment sectors of the textile industry, I propose to allow accelerated depreciation at the rate of 50 per cent on plants and machinery purchased under the Technology Up-gradation Fund Scheme.

172. In order to give a boost to the commercial vehicles sector presently facing recession, I propose to allow accelerated depreciation at the rate of 50 per cent on new commercial vehicles for one year.

173. Each of my past three budgets has provided for increasing tax incentives for the housing sector. Sir, continuing with this practice, I propose to further increase the maximum amount of deduction available for interest payable on housing loans for self-occupied houses from rupees one lakh to rupees one and a half lakhs.

174. For persons having income from house property, the present deduction of 25 per cent of annual value for repairs etc. is proposed to be enhanced to 30 per cent. However, there will be no further deductions, except for the expenditure incurred by way of interest payment on housing loans.

175. I propose to extend the tax incentives allowed by way of deduction or rebate on payments of LIC premium to all insurance companies that have been approved by the Insurance Regulatory and Development Authority

176. The presence of multinational enterprises in India and their ability to allocate profits in different jurisdictions by controlling prices in intra-group transactions has made the issue of transfer pricing a matter of serious concern. I had set up an Expert Group in November 1999 to examine the issues relating to transfer pricing. Their report has been received, proposing a detailed structure for transfer pricing legislation. Necessary legislative changes are being made in the Finance Bill based on these recommendations.

177. The foreign telecasting channels will henceforth be taxed in India, on their income computed in accordance with the provisions of the Income-tax Act.

178. Sir, I propose to bring about a number of measures that will be friendly to the taxpayer. The time limits for issue of refunds, reassessment and reopening of assessments by the Income-tax Department are proposed to be reduced. The Department will also no longer have power to withhold the refund due to an assessee. Similarly, there will be no requirement to obtain a Tax Clearance Certificate under section 230A from the Assessing Officer before transfer of immovable property. I also propose to remove the discretion presently available in deciding the quantum of penalties. Henceforth, a fixed amount of penalty will be leviable for most of the defaults.

179. Certain educational and medical institutions are required to be approved for claiming tax exemption. At present, these institutions have to file their application for approval to the Central Board of Direct Taxes. Sir, I propose to delegate this power to Chief Commissioners of Income-tax.

180. To sum up, Sir, my proposals made in this Budget on the Direct Taxes will result in a revenue loss of Rs 5,500 crore, which I propose to make up with tax buoyancy and increased voluntary compliance. I estimate that the direct tax revenue in 2001-2002 would be Rs 84,800 crore.

181. Mr. Speaker, Sir, with these proposals I estimate total tax revenue receipts for the Centre at Rs 163031 crore and the fiscal deficit at Rs 116314 crore or 4.7 per cent of GDP. I could have managed a lesser fiscal deficit but that would have been possible only at the cost of growth, which was unacceptable.

182. This is a budget for carrying forward the second generation of economic reforms. This is a budget for growth. This is a budget for equity with efficiency. This is a budget for a new deal to the people of India in the new millennium.

183. Mr. Speaker, Sir, with these words, I commend the budget to this August house.

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