The Indian Budget 1996-97 The Indian Economy Overview


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Taxation [3]

  1. I also propose to allow depreciation in the case of fractional ownership of assets because of the need for joint financing of big, capital intensive projects by a consortium of financiers having fractional shares in the assets.

  2. In order to promote efficiency in industry, I propose to provide that unabsorbed depreciation will be carried forward for a period of eight years only in the same manner as business losses.

  3. The practice of sale-and-lease-back of assets results in passing of very high depreciation to the leasing concerns. This needs to be curbed. Hence, I propose to provide in the Income Tax Act that in case of sale-and-lease-back transactions, the written down value of the asset, in the hands of lessee, who was the previous owner, will be treated as cost in the hands of the lessor. This measure, while not affecting bonafide transactions, will prevent loss-making concerns from indulging in unhealthy trade-off of depreciation.

  4. I find it unreasonable that commercial properties, not used by the assessee as his business, office or factory premises, should be outside the levy of wealth-tax. Accordingly, I propose to plug this unintended loophole and levy wealth-tax on such commercial properties.

  5. Other measures of tax relief proposed by me include -
    1. Allowing a special deduction of Rs.15,000 to the patient or guardian of a patient of protracted diseases like cancer or AIDS involving considerable expenditure on treatment.
    2. Exempting under section 10(24) of the Income Tax Act the income of an Association of Registered Trade Unions.
    3. Extending 100 per cent deduction under section 80G of the Income Tax Act to -
      • Donations made to Illness Assistance Funds established by the Central government and the State governments to meet the medical expenses of the poorest of the poor;
      • Donations made to State and National Councils of Blood Transfusion recently set up by the Ministry of Health and Family Welfare; and
      • Donations made to the three funds established by the armed forces of the country. These are the Army Central Welfare Fund, The Indian Naval Benevolent Fund and the Air Force Central Welfare Fund. This is my way of saluting the brave officers and jawans of our armed forces.

  6. As a part of our obligation to SAARC I am exempting from income tax the income of SAARC Fund for Regional Projects (SFRP).

  7. In order to promote industrial development in the North- Eastern region of the country, a North-Eastern Development Finance Corporation was established in August, 1995. I propose to exempt its income from tax.

  8. These proposals are likely to result in an improvement of revenue under direct taxes which is estimated at Rs.912 crore.

  9. I shall now come to the proposals relating to indirect taxes.
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