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February 14, 2000
Biz chambers urge Sinha to grant industry status to housing
A comprehensive scheme of fiscal measures including infrastructure status to housing sector would boost private participation in urban infrastructure, according to two leading business chambers.
The infrastructure definition should be broadened to include solid waste management, new township development, social infrastructure, augmentation, upgradation, renewal and expansion of urban infrastructure, the Confederation of Indian Industry and the Federation of Indian Chambers of Commerce and Industry said in their pre-Budget presentation to the finance ministry.
''Roads, water treatment plants, etc, are by themselves eligible for tax concessions under Section 80-IA of the Income-Tax Act. However, when these services are provided in a township by private sector, then they would not be considered for concession under infrastructure heading. This anamoly has to be rectified by extending this benefit to the private sector,'' FICCI said.
In a bid to increase credit availability for urban infrastructure, the CII has suggested that local bodies should be allowed to issue tax-free municipal bonds, to be monitored by the finance ministry, in order to enable them to access funds from the markets.
The CII further suggested amendments to Section 36(1)(viii) of the Income Tax Act in order to equate investment in infrastructure facilities with investment in tax-free bonds, thus excluding interest received on such income from tax.
The urban infrastrucutre sector should also be given access to priority sector funding from the banking sector, and to long-term sources of finance like insurance and provident funds.
Exemption from indirect taxes like excise duty, sales tax, customs duty, stamp duty, etc, is also suggested. In addition, the benefits contained in Section 36(1)(viii) should be extended to include guarantee and credit enhancement that are for a tenor beyond five years and co-extensive with the term of financing.
In order to streamline procedures, the CII advocated that urban infrastructure projects carried out at the local level should not require approval from the central government.
A clear definition and process of computation should also be provided for the ''cost of capital'' to commercial banks/financial institutions that provide ''long term finance'' to infrastructure projects.
According to FICCI, the increase in level of deduction to Rs 75,000 per annum on the borrowed funds for house property brought about in the last budget was a very welcome measure. In case of property built for letting out, 100 per cent interest is allowed as a deductible expense.
Therefore, the same way 100 per cent tax deduction should also be allowed for property meant for selt-occupation. In case 100 per cent tax deduction is not possible, at least this limit be increased to Rs 200,000 in order to provide relief to industry.
If higher interest is allowed, it will encourage people to have own houses and increase the overall housing stock in the country.
FICCI has also suggested deemed export status to realtors who have been making concerted efforts for sale of property to Non Resident Indians and other eligible persons abroad to mobilise foreign exchange.
This is being done at huge marketing cost, yet no incentives are being made available for earning foreign exchange. It is strongly felt that foreign exchange earned out of real estate be considered as deemed exports and proprtionate income as in the case of commodity exporters should be exempted from taxation.
The other suggestion of FICCI is related to abolition of wealth tax on urban land and the house property. The Wealth Tax Act grants exemption from wealth tax in respect of urban land only for a period of five years.
There is no such limitation for any other kind of item held as stock in trade. This limitation of five years should be removed and urban land held as stock in trade should not be liable to wealth tax.
Wealth tax exemption is presently available to only a single housed property and other housed properties attract wealth tax at market value. Therefore, the Wealth Tax Act has to be amended to completely exempt house tax property from its ambit.
Run-up to the Budget 2000-2001
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